TC Energy reports progress on all fronts from the feed-gas pipeline for LNG Canada to Keystone XL oil

Friday, 31 July 2020
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TC Energy Corp., the Canada-based North American pipeline company building the Coastal GasLink Pipeline from Dawson Creek to the Royal Dutch Shell-led LNG Canada project at Kitimat in British Columbia, has given a detailed update on work.

TC Energy’s summary of progress on the LNG feed-gas connection came as it reported second-quarter net income of C$1.3 billion (US$937 million) compared with C$1.1Bln (US$880M) in profits for the same period in 2019.

The company stated that it did not expect the Covid-19 pandemic to have any material negative impact on 2020 earnings or cash flows as most of its earnings come from long-term contracts.

For the six months to the end of June TC Energy reported net profits of C$2.4Bln versus C$2.1Bln in the first half of 2019.

The pipeline will be 670 kilometres (416 miles) in length, running from the Dawson Creek area of northeast BC to the Pacific coastal town of Kitimat where the liquefaction plant is being constructed.

Once completed, the pipeline will connect abundant Western Canadian Sedimentary Basin natural gas supply to the Shell-operated liquefaction plant.

TC Energy completed project financing after the sale of stakes to equity funds, allowing a full work programme to go ahead.

The transaction released proceeds of around C$2.1 billion (US$1.5Bln) for the Calgary-based operator from the sale to two equity funds, KKR-Keats Pipeline Investors II (Canada) Ltd. (KKR) and a subsidiary of Alberta Investment Management Corp. (AIMCo).

Shell and its four partners in LNG Canada, Mitsubishi Corp. of Japan, Malaysian energy company Petronas, Chinese major PetroChina and Korea Gas Corp., have already started construction of the liquefaction plant and affiliated facilities.

The plant is being built on a brownfield site near Kitimat that had been an energy products terminal before being acquired by Shell in 2011.

The Shell-led export project is working closely with the Haisla First Nation whose traditional lands are in the Kitimat coastal region as well as with other First Nations along the pipeline route.

TC Energy has said it remained committed to partnering with the 20 First Nations who have executed agreements with Coastal GasLink project.

The company has provided an opportunity for them to invest in the project with an option to acquire a 10 percent equity interest in Coastal GasLink.

“The introduction of partners, establishment of dedicated project-level financing facilities, recovery of cash payments through construction for carrying charges on costs incurred and remuneration for costs to date are expected to substantially satisfy our funding requirements through project completion,” explained TC Energy.

“We continue to work with the 20 First Nations that have executed agreements with Coastal GasLink to provide them an opportunity to invest in the project, with an option to acquire a 10 percent equity on similar terms to what has been agreed with KKR and AIMCo,” said the company.

TC Energy said that field activity continued to increase across the project following the spring thaw, with crews re-mobilizing while incorporating Covid-19 guidelines for construction safety.

“Ongoing work activity includes construction of roads, bridges, worker accommodation and right of way grading,” said TC Energy.

Pipe delivery continues with more than 50 percent of required pipe supply having arrived on site and mainline mechanical construction is now starting.

“The project is currently conducting a review of baseline cost and schedule to incorporate scope increases, permit delays and Covid-19 impacts,” added TC Energy.

The Calgary-based company had also announced that it would proceed to build the Keystone XL oil pipeline and commenced construction in April 2020.

“During the first half of 2020, our diversified portfolio of essential energy infrastructure continued to perform very well,” said Russ Girling, TC Energy’s President and Chief Executive.

”I am proud that in these unprecedented times we have continued to deliver the energy and advance projects vital to powering our industries and institutions as well as to the daily life and mobility of millions of North Americans,” added the CEO.

The company stated that despite the challenges brought about by Covid-19, TC Energy's assets “have been largely unimpacted”.

“With few exceptions, flows and utilization levels remain in line with historical and seasonal norms, underscoring their criticality to North American consumers, institutions and commerce,” stated the company.

TC Energy previously announced that it would proceed with construction of the Keystone XL oil pipeline, resulting in an expected additional investment of approximately US$8Bln.

This 1,947km (1210-mile) pipeline will be capable of safely delivering 830,000 barrels per day of crude oil from Hardisty in the Canadian province of Alberta, to the US state of Nebraska.

It will then connect with existing facilities to reach US Gulf Coast refiners to meet critical needs for transportation fuel and manufactured products. Keystone XL is expected to be placed into service in 2023.

The company said that as part of the funding plan, the Government of Alberta has agreed to invest around US$1.1Bln as equity in Keystone XL which substantially covers planned construction costs through the end of 2020.

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