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Capital costs creep higher for TransMountain Expansion

Capital costs creep higher for TransMountain Expansion

Houston-based Kinder Morgan says it has made "significant positive progress" in its planning of the TransMountain Expansion Project (TMEP).

In 2012, 13 shippers made 15/20 year commitments of 708,000 bbl/day, representing about 80% of the pipeline's expanded capacity. As per requirements by the National Energy Board (NEB), the remaining 20% was reserved for spot volumes. Today, 95% of those volumes have been confirmed, putting 22,000 bbl/day of pipeline capacity back on the open market.

The original estimate for the expansion was $4.1 billion, rising to $5.4 billion in late 2015. Kinder Morgan bumped up the price tag $6.8 billion in late 2015. The company has now revised TMEP’s cost estimate to $7.4 billion.

However, the Canadian dollar has depreciated considerably since the original estimate, when the loonie was trading above par with the greenback. In US dollar terms, there has been no cost increase since the late 2015 estimate.

The company says feedback from the public have resulted in scope changes to the project, which have increased costs but made the project safer. The changes include thicker wall piping and additional drilled crossings in environmentally sensitive areas, including the Burnaby Mountain tunnel.

Kinder Morgan says the next step is to arrange financing and make a final investment decision. In their 2017 capital spending program, the company assumes it will find a partner to take on a 50% stake in the project. If all goes according to plan, construction is set to begin in the fall, bringing the in-service date to late 2019.

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