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Kinder Morgan is ready to go ahead with its expansion project for the Trans Mountain crude oil pipeline, the company said in a press release. To fund the project, the pipeline major will list its subsidiary, Kinder Morgan Canada Limited.
The IPO should take place by the end of the month. Kinder will issue 102.9 million shares priced at US$12.60 (C$17) apiece. Total proceeds at this price should come in at US$1.3 billion (C$1.75 billion).
The Trans Mountain expansion project is valued at US$5.48 billion (C$7.4 billion) and will add some 590,000 bpd in pipeline capacity for Alberta’s oil sands operators, bringing the total to 890,000 bpd. It comes in response to output expansion in the oil sands, despite the price crash. Currently, Canada’s oil pipeline network is operating almost at full capacity, and in the coming years growing production will seriously challenge its ability to cope with increased loads, which is what necessitated the expansion of Trans Mountain.
What’s more, the extension will make it possible for Canada to start exporting its oil to Asian markets, as the pipeline will run to the Pacific coast of the country. Finding new markets is important for Canada, again in light of the growing production from oil sands.
Construction is slated to begin in September this year. The new extended pipeline should start operating in 2019. Budget revenues from the new operation, according to Kinder, could reach US$34.6 billion (C$46.7 billion) during the construction period and the first 20 years of operation of the expanded pipeline.
The Trans Mountain expansion project has met with a lot of opposition from environmentalists, but the federal government approved it last year, despite the controversy. Yet not all is done: there were recently elections in British Columbia, which the extended Trans Mountain pipeline will pass through, and according to some journalists, the province may—or rather must—do its own assessment of the carbon emissions aspect of the project. Canada, they remind us, has vowed to cut its CO2 emissions by 200 million tonnes annually.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.