KUALA LUMPUR (March 5): Petroliam Nasional Bhd's (Petronas) joint-venture (JV) partner LNG Canada said it disagrees with contractor TC Energy Corp over cost overruns and delays at its US$6.6 billion Coastal GasLink pipeline.
The Financial Post reported on March 1 that LNG Canada chief executive officer Peter Zebedee had expressed disappointment with the contractor over its earnings call on Feb 18, which said that work on the Coastal GasLink pipeline would likely be delayed due to Covid-19 protocols, while the project would go over its US$6.6 billion budget owing to scope increases, permit delays, as well as a provincial health order requiring new Covid-19 mitigation plans to be submitted.
"The order caused a work pause for both Coastal GasLink and LNG Canada, though work is now scaling back up on the export project and the workforce is expected to rise from 1,200 people to 3,000 people by the end of the month.
"Construction is ramping up on LNG Canada and the first prefabricated steel modules are expected to arrive on site later this year from Asian construction yards, at which point the workforce will expand further until it ultimately reaches 7,000 people.
"As work progresses, the two companies are working to contain costs," the Financial Post reported.
The pipeline, which has a capacity of 2.1 billion cubic feet per day, will connect northeast British Columbia's gas fields with LNG Canada's US$30 billion liquefied natural gas (LNG) export terminal in Kitimat, which is within the same province.
Higher pipeline tolls resulting from the higher costs would only be acceptable if the costs were incurred prudently, said Zebedee.
The publication explained that the higher pipeline tolls would affect the economics of shipping gas from Canada to Asia, and would likely be resisted by LNG Canada's joint venture partners Shell Canada Ltd, Petronas, PetroChina Canada, Mitsubishi Canada Ltd and Korea Gas Corp (Kogas).
In May 2018, Petronas announced that its wholly-owned unit North MontneyLNG Limited Partnership had purchased a 25% stake in LNG Canada. Shell Canada holds a 40% stake in LNG Canada, PetroChinaCanada Ltd has a 15% stake, Mitsubishi Corp has a 15% and Kogas a 5% stake.
theedgemarkets.com has contacted Petronas for comments on the matter.