Trans Mountain Pipeline Warns of 2-Year Delay Over Regulatory Setback
(Reuters) — Canadian government-owned Trans Mountain Corp. 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)
Related News
Related News
- Keystone Oil Pipeline Resumes Operations After Temporary Shutdown
- Freeport LNG Plant Runs Near Zero Consumption for Fifth Day
- Biden Administration Buys Oil for Emergency Reserve Above Target Price
- Mexico Seizes Air Liquide's Hydrogen Plant at Pemex Refinery
- Enbridge to Invest $500 Million in Pipeline Assets, Including Expansion of 850-Mile Gray Oak Pipeline
Comments