TC Energy Upbeat on 2023, Despite Rising Coastal GasLink Cost

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Researched by Industrial Info Resources (Sugar Land, Texas)--Rising labor costs and shortages are hitting one of TC Energy's (NYSE:TRP) (Calgary, Alberta) most anticipated projects hard, along with problems ranging from rough terrain to environmental objections. But the oil and gas giant remains optimistic about its financial and capital-spending outlook going into 2023. Industrial Info is tracking about US$14.8 billion worth of active projects from TC Energy, more than US$9 billion of which are under construction.

Click on the image at right for a graph detailing TC Energy's active projects, by project type.

Industrial Info is tracking US$4.7 billion worth of active Coastal GasLink projects, which are centered around the 422-mile, US$4.28 billion pipeline from Groundbirch to Kitimat, British Columbia. The system is designed to transport up to 2.1 billion cubic feet per day of natural gas from Groundbirch, which is in the south-central area of the Montney Shale, to the proposed Canada LNG export facility near the port of Kitimat. In coming years, the project's developers hope to expand its capacity to 5 billion cubic feet per day.

The project began construction in the first quarter of 2019, when the completion date was estimated to be mid-2021. Since then, disruptions related to COVID-19, constantly rising labor costs, drought conditions and unhospitable geography have pushed the date for substantial completion back to mid-2025 at the earliest. Nonetheless, TC Energy says the project is now 80% complete "overall," and it expects to see mechanical completion (that is, when all materials and equipment have been installed and tested) by year-end 2023.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Pipeline Project Database can learn more about the pipeline from a detailed project report.

"We continue to face significant cost pressures in Western Canada relating to labor costs and shortages of skilled labor, along with contractor underperformance and disputes," TC Energy said in a press release. "The project has also been impacted by other unexpected events including drought conditions, and erosion and sediment control challenges. As a result, we now expect a material increase in project costs and TC Energy's corresponding funding requirements."

Chief Financial Officer Joel Hunter said TC Energy will increase its asset sales to pay for any additional Coastal GasLink costs.

The pipeline's development is concurrent with the construction of four compressor stations, each ranging in value from US$100 million to US$120 million. Each station will include a pair of Mars 100 gas turbines from Solar Turbines, a subsidiary of Caterpillar Incorporated (NYSE:CAT) (Deerfield, Illinois). Subscribers can read detailed reports about the compressor-station projects located, west to east, near the British Columbia cities of Houston, Fraser Lake, Tumbler Ridge and Dawson Creek.

TC Energy already had raised its cost estimate for the full Coastal GasLink project by nearly 70% to US$11.2 billion in July, but executives now say the project is facing a further material increase in project costs and corresponding funding requirements. Executives say they expect to provide an updated capital cost estimate in early 2023.

Despite these challenges, TC Energy expects its 2023 earnings before interest, taxes, depreciation and amortization (EBITDA) to be 5% to 7% higher than in 2022: "Our business remains resilient and continues to produce strong results. Approximately 95% of our projected comparable EBITDA is under long-term take-or-pay contracts and/or rate regulation, which provide insulation against rising inflation and interest rates."

TC Energy is targeting capital expenditures of US$5 billion to US$7 billion for 2023. The company's Nova Gas subsidiary is preparing to begin construction in the coming months on the US$600 million expansion of its Intra-Basin System in Alberta, which will add about 74 miles of line from Valleyview to Fox Creek. It is designed to transport up to 309 million standard cubic feet per day. Subscribers can learn more in a detailed project report.

Subscribers to Industrial Info's GMI Project Database can click here for a full list of detailed reports for projects mentioned in this article, and click here for a full list of related plant profiles.

Subscribers can click here for a full list of detailed reports for active projects from TC Energy.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).