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[VeritasVern]

Oil shippers demand explanation from Trans Mountain for pipeline cost overruns

 

March 14, 2024 12:08 PM  The Canadian Press0 Comments

 

 

 

 

CALGARY – A group of oil shippers is asking the Canada Energy Regulator to compel the company behind the Trans Mountain pipeline expansion to provide them with a full and detailed breakdown of the project’s escalating construction costs.

The shippers — which includes Canadian Natural Resources Ltd., Suncor Energy Inc., PetroChina Canada Ltd. and Marathon Petroleum Canada — are seeking an order from the regulator requiring Trans Mountain Corp. to provide more information about why the project’s costs have ballooned to more than $30 billion from a 2017 estimate of $7.4 billion.

Oil companies are concerned with the escalating costs because they will have to pay for a portion of them in the form of rising tolls, the fee the pipeline charges its customers to move their oil.29dk2902l

Trans Mountain is seeking to recover more than $9 billion in costs from oil companies, through the charging of a benchmark toll that is nearly twice the amount of a 2017 estimate.

The Canada Energy Regulator has yet to make a decision on whether to approve the higher tolls.

Oil shippers say Trans Mountain Corp. must provide more detailed information in order to prove the rising price tag of the project is both reasonable and necessary.

[NonCredibleSrc]

I appreciate the article and can certainly understand why anyone would want better insight into the numbers in order to validate any related pipeline charges, but... Comparing anything 'real' in 2024 to a 2017 'estimate' is futile - it borders on moronic. Beyond the fact that an estimate is just an, umm, ESTIMATE, the landscape in 2024 is so radically different than in '17 it

[Quintessential1]

Yeah it was a tough economic time to try and build anything.  Just ask TRP about their estimates on the Coastal Gas Link.  The difference is the Coastal Gas Link is going to have contracted rates that I doubt TRP can just increase because it cost more to build than they planned on.  TMX are the only crude pipes heading to the coast and they are going to charge what it cost to expand

[VeritasVern]

NonCredible you actually think this article's underlying intent is to enrage - simply for stating financial facts and a request by the shippers for accountability, given they will be the one's to pay the higher tolls? I don't find the article inflamitory at all, actually its quite passive.  Kinder Morgan had timelines that would have completed the project before the recent

[NonCredibleSrc]

Looks like the article worked didn't it. Vern, I too would like to pay for things at 2017 rates - shoot, 2007 rates, maybe even the 90's! Point is, all budgets/estimates from those days are done. You can't go back. Comparing costs of anything today to the better part of a decade ago is stupidity. Were all the right moves made by all levels of government locally and internationally

[VeritasVern]

NonCred, the article didn't do what was intended. Why? Because I had figured things out many years before this insignificant article was published. Somehow your sensitivities were that an article speaking to the effects of inflation on a major development is taboo and deemed enraging? You are right, I don't know much about you but you have put forth little besides - oh well inflation

[NonCredibleSrc]

With all due respect - what I said was comparing numbers generated in 2017 to costs incurred over the last number of years is ridiculous and that the only reason one would publish such numbers is to elicit responses based on anger. Additionally, I did not say 'who knew' to inflation ocurring. I would suggest you re-read. I said who knew prior to covid that such a bump in inflation was

[VeritasVern]

You are back tracking I see, but we know what you said. Who knew, how dare they. There should be no reason, absolutely none for a government to buy a pipleline. Clearly you don't get it, try taking those rose colored glasses off you might be a bit less passive.It wasn't just inflation but also delay after delay that escalated costs.  Central banks are supposed to be independant but

[Sclarda2]

While some inflation and cost overruns are expected on large projects going from $7 billion to  $30 billion is a little much. Even allowing 5% inflation per year for those 7 years that would equal aprox.  $2.5 billion in extra costs bringing the price up to $9.5 to $10 billion.   Just saying oh that $7 billion was just a number thrown out there is kind of hard to believe. You

[Quintessential1]

Hmmm.....so you're saying it's not the same as just any other large business taking on a private project and having to report to shareholders? Of course it isn't.  Not only do they recoup the economic benefits you stated that the article didn't even mention for whatever reason, (It was designed to enrage?),  but they simply did not care about the costs (or they did and

[JayBanks]

I don't give "likes" out easily, but you earned mine on that one! LoL Very well played. There's not only the costs on the pipeline that are factored in here, a ton has gone to regulators, courts, consultants in many areas, government officials and other expenses that arent even calculated on that cost to build but all got thier fingers in and involved... I'm sitting on my

[VeritasVern]

Good points Quinte and good example of how the discusion likely played out. The one comment I have is that regarding the higher income taxes the Government would recoup that Scarla proposed. If I understood it correctly, the amount of income tax collected would be the same whether KM owned it or the Federal Gov, because they will be employing the private sector to finish the pipeline. It's the

[Sclarda2]

Yes the government would rake in the same income taxes and other taxes on suppliers, contractors and all the economic activity that would be caused by the pipeline construction whether it was owned by the government of KM or anyone else. Having businesses would have been a lot better than the government doing it as they would finance it and cost overruns would be there problem.  The fact is

[VeritasVern]

Right, but the essential take away from all of this is the message to the oil industry, and the investment world is that there is way too much risk to invest in a major pipeline. Your costs are going to escalate from stoppage after stoppage and next time the Government won't be there to save the day. Looks like delays are still happening at the 11th hr. I am sure no one is surprised https

[Sclarda2]

Some pipelines still seem to go ahead such as the LNG line to Kitimat and some other smaller ones. Personally now that we have the TMX up to 900k barrels to take some of the excess  western Canadain oil i would not even worry about producing more and more oil. Canadas up to aprox. 5 million barrels a day production. Why not leave it there and get a good price for the oil which will then last

[JayBanks]

You tell all the Canadian oil related companies that they are not able to grow thier buisness outlooks in the oil patch beyond where they are now without spending large amounts on M&A... and see if investors stick around. Your asking to create a supply management system like we have with agricultural products like milk, which is fraught with issues inside itself with both the commodity, its

[Quintessential1]

It's interesting how TMX isn't even open yet and we are already discussing the ramifications of too much oil egress and shutting in production much like the predominately natural gas producers have faced for decades and are facing already again and our first LNG exporter isn't even exporting yet either.  The thing we should have learned over the years as a country is that all of

[Sclarda2]

Investors will stick around and pile in if oil supply is limited and prices stay high and oil companies make a lot of profit.  Producing more and more was tried from 2014 on with oil in the $50 to $60  range for many years. How did oil investors do in those years?   This planet is in the shape its in because of endless mindless growth. What we need is a sustainable industry

[Re1ndeer2]

Not to state the obvious, management must have a standard.that requires Safeguards, Permits. and Authourizations are in place prior to work starting....Also, why isn't a CER rep assigned to each worksite.....?  These unannounced "inspections" are adversarial to say the least..Bush league