The company behind the contentious Coastal GasLink pipeline spanning northern British Columbia says it has reached a "milestone" settlement with the group that is building a liquified natural gas terminal on the West Coast.
Amid rising global demand for fossil fuels, TC Energy Corp. CEO François Poirier said it has signed a deal with LNG Canada "that settles all outstanding disputes" and allows for the "safe and timely execution of our largest LNG-linked project."
The 670-kilometre pipeline, which aims to carry natural gas across the province to the LNG Canada processing and export facility in Kitimat, is about 70 per cent complete, he said.
TC Energy expects "mechanical completion" - when all construction and testing is wrapped up and the tubes are ready to move the chilled gas - by the end of 2023.
Details of the settlement are undisclosed, but it concerns costs stemming from causes as wide-ranging as COVID-19, the weather, project "scope" and "other events outside of Coastal Gaslink LP's control," TC Energy said.
The pipeline's new cost estimate stands at $11.2 billion, versus $6.6 billion forecasted a year ago.
"Together with LNG Canada, this project will provide the first direct path for Canadian natural gas to reach global LNG markets," Poirier said.
The project has faced political and environmental obstacles over the past few years.
A series of protests by members of the Wet'suwet'en Nation and other Indigenous and green groups has repeatedly stalled progress along parts of the pipeline, while a pair of fines from the B.C. government nabbed the company for non-compliance with environmental orders this year.
TC Energy has agreements with all 20 elected First Nations councils along the route, and signed option deals earlier this year for potential sale of a 10 per cent stake to two Indigenous groups representing 16 of those communities, Poirier noted on a conference call.
He also alluded to the energy turmoil stirred up by Russia's invasion of Ukraine in February, saying global demand for LNG is projected to grow by 50 per cent to 75 billion cubic feet a day by 2030 from 50 billion currently.
"This growth is largely underpinned by heightened energy security concerns and the reorder and reorientation of the energy mix," he said.
"This next wave of LNG demand is creating significant opportunities that align with our strategy. TC Energy's unparalleled asset footprint will play a critical role in securing global energy supply."
However, analyst Robert Kwan of RBC Capital Markets questioned whether returns on the pipeline will be more modest than the initially anticipated returns, "which I think were pretty low to begin with."
"Phase 1 clearly didn't achieve its initial return objectives," replied Bevin Wirzba, TC Energy's head of natural gas pipelines. "But as we indicated, coming to a settlement puts the project in the best position to move forward."
Phase 1 of the project comprises constructing the pipeline, while Phase 2 involves more than doubling its capacity through the installation of compressor stations.
TC Energy, which owns 35 per cent of the venture, sold a 65 per cent stake in it to Alberta Investment Management Corp. and KKR & Co. Inc. in 2020.
The Calgary-based company posted a lower quarterly profit Thursday, reporting net income attributable to shareholders fell to $889 million or 90 cents per diluted share in the second quarter from $975 million or $1 per share a year earlier.
The pipeline operator's comparable earnings were $979 million or $1 per common share, down from $1.04 billion or $1.06 per share in the same period of 2021.
Revenue for the three months ended June 30 increased to $3.64 billion from $3.18 billion during the same quarter last year.
This report by The Canadian Press was first published July 28, 2022.
Companies in this story: (TSX:TRP)
Christopher Reynolds, The Canadian Press