Canada Risks Losing $15B On Controversial Trans Mountain Pipeline – Morningstar

The Trans Mountain Pipeline, owned and operated by the Canadian Government, has been in the spotlight over the past few years. However, the pipeline has been controversial recently, with the Canadian Government proposing to expand the pipeline’s capacity to increase the flow of oil and gas to the West Coast of Canada.

The expansion project was estimated to cost up to $7.4B. However, the costs have recently risen to a whopping $20 billion.

This significant increase in cost has caused many to question the project’s economic viability, with some claiming that the Canadian Government may incur a financial loss on the Trans Mountain Pipeline project.

Trans Mountain Pipeline Expansion To Cost Canadian Taxpayers An Estimated $20 Billion

Per Morningstar Inc, Canadian taxpayers could face a deficit of $20B due to a surge in expenditures to expand the government-possessed Trans Mountain Pipeline. Prime Minister Justin Trudeau’s Government is anticipated to receive only up to $15B when it sells Trans Mountain, or even less, said Morningstar analyst Stephen Ellis in an interview.

In 2018, the Government gave Kinder Morgan Inc. $4.5B for their system after the firm declared they would like to cancel the plan to expand their capacity to 890K barrels daily. The total cost has risen to approximately $31B for various reasons, notably supply-chain issues.

According to Ellis, “there is no chance the pipeline will be able to make back the $31B spent on it.” The Canadian Government purchased the Trans Mountain pipeline, the only one transporting crude oil to the British Columbia shore close to Vancouver.

This allows Canadian oil shippers to export their products elsewhere instead of to the United States only. Finance Minister Chrystia Freeland’s spokesperson Adrienne Vaupshas stated that the expansion of Trans Mountain would help Canada to receive fair market value for the resources.

Enbridge Inc.’s much more extensive system that transports Canadian crude to the United States as far as the Gulf Coast is a competitor of Trans Mountain. This could restrict the amounts Trans Mountain can receive to the 20 percent of oil shippers that has no contracts, holding the incomes from the pipeline low, according to Ellis.

Government Unveils Plan To Maximize Output Of Trans Mountain Pipeline 

The Government could market the Trans Mountain pipeline project to a conglomerate of firms that can take on reduced returns on the channel by developing their existing petroleum plants, like storage tanks and other media linked to it.

The Canadian Government has declared that the Trans Mountain pipeline is a “national interest” due to its capability of providing a route to Asian markets. Without this route, Canada would rely on the United States as the sole buyer of its oil exports.

Meanwhile, TD Securities and BMO Capital Markets have given a public value analysis, stating that external financing is a workable solution to finance the completion of the project. They further stated that financial and strategic investors would participate in the divestment process when the project is complete.

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