Trans Mountain pipeline warns of 2-year delay over regulatory setback (updated)

Canada Energy Partners

14/12/2023 21:48

(Adds analyst comment)
    By Rod Nickel
       WINNIPEG, Manitoba, Dec 14 (Reuters) - Canadian
government-owned Trans Mountain Corp  TMC.UL  asked the
country's energy regulator on Thursday to reverse a decision
rejecting proposed construction changes on its oil pipeline
expansion, warning of a possibly "catastrophic" two-year delay
and billions of dollars in losses.
    If Trans Mountain goes ahead with the construction plan that
is currently approved, complications could result in a borehole
for the pipeline becoming compromised, forcing Trans Mountain to
find an alternative installation plan, the company said in a
letter to the Canada Energy Regulator (CER).
    The CER this month had denied Trans Mountain's request for a
variance on a section of pipeline under construction in British
Columbia. Trans Mountain had asked to be allowed to install
smaller diameter pipe in a 1.4-mile (2.3-km) section of the oil
pipeline's route after encountering difficult drilling
conditions due to the hardness of the rock in a mountainous area
between Hope and Chilliwack.
    The CER decision was yet another setback for the
over-budget, delayed C$30.9-billion ($23.05 billion) expansion
project (TMEP), intended to triple shipments of crude from
Alberta to Canada's Pacific coast to 890,000 barrels per day
once it starts operating.
    In Thursday's letter, Trans Mountain said the hard rock
conditions and fractured areas within the bedrock have allowed
high rates of water ingress, causing complications. Those
problems are likely to worsen if Trans Mountain has to proceed
with installing larger-diameter pipe, it said. 
    "If the (horizontal directional drill) fails and Trans
Mountain is required to implement an alternative installation
plan, the TMEP schedule will likely be delayed by approximately
two years, and Trans Mountain will suffer billions of dollars in
losses," the company said.
    Trans Mountain asked for a decision no later than Jan. 9 to
stick to its current schedule.
        The Trans Mountain expansion is due to start shipping
oil by the end of March 2024. Trans Mountain had previously
warned of a shorter delay of 59 days if it was forced to install
larger-diameter pipe.
  
        Given the new information provided by Trans Mountain,
the CER will likely approve its request, Stifel analyst Michael
Dunn said in a note.
  
        Concerns about delays have increased the discount this
month on Canadian heavy crude compared to the North American
benchmark. Oil producers have been raising output in
anticipation of expanded options to export their oil to
refineries in California and Asia.
  
        The CER could not be immediately reached.
  
        Construction of the Trans Mountain expansion is 97%
complete.
  
 ($1 = 1.3405 Canadian dollars)

 (Reporting by Rod Nickel in Winnipeg, Manitoba; editing by
Jonathan Oatis and Deepa Babington)
 ((rod.nickel@tr.com; X: @RodNickel_Rtrs;))