It has been a year of frantic construction in the Canadian pipeline business..The $7.4 billion Trans Mountain Pipeline is scheduled to start deliveries in late 2023 after blowing out its budget to an estimated $21.4 billion. No doubt the board meeting at which that information was shared was an interesting one. Inclement weather and a pandemic played a part in the cost overrun and no doubt the regulator had something to do with it as well. Regulators make good scapegoats when you have lollipaloozas like this one..For me and my house, causing Chrystia Freeland to say — through a spokesperson — “The Trans Mountain expansion project is in the national interest and will make Canada and the Canadian economy more sovereign and more resilient,” is almost worth the overrun..The throughput of the expanded pipeline system will more than double from 300,000 to 890,000 barrels per day of crude oil and finished products. The existing pipeline has the flexibility to take almost any crude oil or refined product and move it in a “plug” to Burnaby while the newly constructed pipeline will transport diluted bitumen primarily to be loaded on ships for transport to the US Gulf Coast where the refineries that can handle this crude are located..But wasn’t the proposed Keystone XL project supposed to pipeline diluted bitumen directly to the US Gulf Coast?.Don’t ask..The other major pipeline being constructed is the Coastal Gaslink Project which will bring natural gas from northern British Columbia to the west coast at Kitimat. The cost estimate for this pipeline has also gone up — from $6.6 billion to $11.2 billion. The 2.1 billion cubic feet of natural gas delivered each day will be liquified at a facility being built for LNG Canada and shipped to overseas markets..Apparently, the project slipped under the radar of Prime Minister Trudeau when he declared there's no business case for exporting Canadian LNG production. The pipeline project is owned by TC Energy, private equity firm Kohlberg Kravis Roberts (KKR,) and the Alberta Investment Management Corporation. There are plans to sell an additional 10% of the project to a consortium of First Nations corporations. This project is also anticipated to be complete towards the end of 2023..Unfortunately, the project was plagued by work disruptions and significant vandalism. In February of 2022, nine workers were chased off the project and a responding RCMP officer was injured by assailants. Damage was estimated to be in the millions of dollars..But no one honked their horns — which was a good thing, because that can get you thrown in jail..Liquified natural gas (LNG) is produced by compressing natural gas to a temperature of –162 degrees Celsius, at which point it is a liquid. The 2.1 billion cubic feet per day of natural gas amounts to 14 million tonnes per year of LNG and the project was designed with the option to double the production capacity of the LNG facilities pending shareholder and regulatory approvals..For all the problems of construction delays and cost overruns, Canada’s ability to design, finance and construct large infrastructure projects remains significant. Megaprojects that involve hard to define components such as digging trenches in mountainous terrain are susceptible to interruptions and construction issues so despite these problems, the employees of the TC Energy and Trans Mountain projects can be justifiably proud of their work. Both pipelines will add significantly to Canada’s economy..What else might 2023 now bring?.No promises but one man’s hard luck might be another’s good fortune. There are rumours German manufacturing companies are looking to relocate some of their production facilities in Alberta. Cutting off energy supplies, no matter how noble the reason, is not conducive to steady employment and shareholder return. Stable, democratic jurisdictions with abundant, low-cost energy are becoming hard to find and so 2023 might be Alberta’s year to build new industries. Based on recent reporting, the government is on the hunt for just such investors. That is a good thing..And Christmas is also a good thing, so please have a merry one with unlimited friends and family. You can join me on substack at mblytle.substack.com.
