Enbridge pins Line 3 project cost hike on labor, extra work, FX
CALGARY, Alberta, June 19
CALGARY, Alberta, June 19 (Reuters) - Enbridge Inc said on Thursday the price tag to replace a major pipeline that exports Canadian crude oil to the U.S. had jumped 7 percent to C$7.5 billion ($6.91 billion) because of labor costs, additional engineering work on its Hardisty, Alberta, crude terminal and a weaker Canadian dollar.
Canada's largest pipeline company is planning its largest ever capital program to replace Line 3, that carries crude from Hardisty to Superior, Wisconsin, so it can operate at its maximum capacity of 790,000 barrels per day.
In a conference call to discuss the cost increase that was announced on Wednesday, Enbridge Chief Executive Al Monaco said a number of factors had contributed to the revised estimate.
When the project, on track to be completed by the second half of 2017, was originally announced in March, Enbridge said it would cost $7 billion.
"It is roughly split between the scope changes on the terminal, the mainline construction market and general permitting issues and maybe the FX component is just a tad lower than that," Monaco said.
Enbridge shares, which fell 1.9 percent on Wednesday after the cost hike announcement, were down 1.25 percent to C$50.74 on the Toronto stock exchange.
Enbridge said the Line 3 project will not need a U.S. presidential permit because it falls in the category of maintaining the line, unlike TransCanada Corp's Keystone XL project which is mired in its sixth year of waiting for U.S. approval after running into fierce opposition from environmentalists opposed to Canada's oil sands.
Earlier this week, Enbridge received Canadian governmental approval for its $7.9 billion Northern Gateway pipeline, which will carry crude from Alberta's oil sands to the coast of British Columbia for export, despite protests from environmental and aboriginal groups.
Monaco said Enbridge was pleased with the decision of the government's joint review panel on Northern Gateway but the company still had work to do to secure support.
"We have two priorities right now. The first is to address the conditions of the joint review panel and the remaining gaps with the BC government. Second, we'll continue to work on the ground to address concerns and further build local support," he said. ($1 = 1.0853 Canadian Dollars) (Editing by Marguerita Choy)
Trending On Reuters
We are living longer but not creating financial plans to keep pace. Advisers give tips on how to make sure you don’t outlive your money. Video