TC Energy Corp. warned of higher costs for its Coastal GasLink pipeline, adding another financial hurdle for a project that will supply Canada’s first major liquefied natural gas export plant.
Wage increases, a shortage of skilled labor and disputes with contractors have contributed to a “material increase” in the cost of building the pipeline that will run from gas fields in eastern British Columbia to the coastal port of Kitimat. Management will give a new cost estimate early next year and its funding requirements will also rise, the company said in a statement Tuesday.
TC Energy fell 4.5% to C$62.42 at 11:22 a.m. in Toronto, the biggest drop since Sept. 23.
The pipeline, which will feed the Shell Plc-led LNG Canada plant, has been plagued by higher expenses because of construction delays caused by Covid-19 and protests. In July, TC Energy raised the estimate by 70% to C$11.2 billion ($8.2 billion).
Calgary-based TC Energy had been locked in a dispute with LNG Canada over who would pay for the rising costs and threatened last year to suspend some construction activities as the two sides quarreled. The cost estimate in 2018 was C$6.2 billion.
Coastal GasLink is now 80% complete and is still on schedule to be finished by the end of 2023. TC Energy said it’s looking to recover some costs from contractors.
The LNG Canada project has been billed as the largest private-sector construction effort in Canada’s history, with a potential total investment of about C$40 billion ($29.4 billion) in the liquefaction plant, pipeline and gas drilling.