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Kinder Morgan will restart work on the Trans Mountain pipeline expansion project next month, the company said in a filing. CTV reports that the company had filed a six-month construction schedule with the National Energy Board, and work will start with the construction of a 120-kilometer stretch of the extension in Alberta.
The company had suspended all nonessential work on the project earlier this year amid growing opposition from environmental groups, and notably, from the new government in British Columbia. Things escalated quickly on the political level, with B.C. and Alberta engaging in a provincial version of a trade war, and the federal government proving itself incapable of settling the differences despite its repeated support for the project.
Eventually, Ottawa decided to buy the pipeline extension project itself—the announcement coming just a few days before a deadline set by Kinder Morgan to abandon the project unless the government could guarantee it would move forward. The price tag for Trans Mountain was US$3.43 billion (C$4.5 billion), substantially below the estimated US$5.95-billion cost of the project, and the federal government said it will look for external investors to sell it on to.
Trans Mountain runs from Edmonton to the B.C. Pacific coast, and the expansion would triple its current capacity to some 890,000 bpd. These are much needed barrels of capacity for Albertan oil sands producers, whose output has been growing. Pipeline capacity has been lagging behind production, under the weight of strong opposition. The expansion will also open up Asian markets for Canadian crude, which currently goes almost exclusively to U.S. refineries.
The pipeline crunch has also severely affected the price of Canadian crude, with its discount to West Texas Intermediate rising to US$30 a barrel earlier this year. Arguments against new pipelines—besides the spill fear—are based on forecasts that oil production will plateau before long, and any new pipeline capacity will become redundant. Yet medium- and long-term forecasts point to production growth, with the average daily production in Canada reaching 5.6 million bpd by 2035.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.