Kinder Morgan Canada drops 4.3 percent after more potential delay

CALGARY, Alberta (Reuters) - Kinder Morgan Canada Ltd shares fell as much as 4.7 percent on Tuesday after the company said there could be more delays in the expansion of its C$7.4 billion (US$5.8 billion) Trans Mountain pipeline expansion, raising concerns about cost blowout.

FILE PHOTO: Dump trucks are parked near crude oil tanks at Kinder Morgan's North 40 terminal expansion construction project in Sherwood Park, near Edmonton, Alberta, Canada November 13, 2016. REUTERS/Chris Helgren/File Photo

Kinder Morgan’s Trans Mountain expansion to Canada’s west coast has already been delayed by nine months. The company said late on Monday that the lack of clarity around municipal permit processes and related judicial process could push it back further. It did not provide a time frame.

The project, an expansion of the Trans Mountain pipeline from Alberta’s energy heartland to a port near Vancouver, would nearly triple capacity to 890,000 barrels per day and significantly increase crude tanker traffic.

The company, a unit of Houston-based Kinder Morgan Inc, did not immediately respond to a request for comment.

Kinder Morgan has not updated its cost estimate for the project since March, a move that would not sit well with the market, analysts said.

“We believe that the market will likely anticipate increased capital costs for the project,” said Royal Bank of Canada analyst Robert Kwan.

“I find it a very odd and sad situation that we have this sort of conflict going on once you’ve got federal approval and previous provincial approval,” said Chris King, vice president and portfolio manager at Morgan Meighen & Associates, who holds shares in Kinder Morgan Inc.

He said he expects the company to provide an update in a week or two and give a more detailed timeline for the project next year.

While the expansion is not considered critical to the Houston parent, it is the main project for Kinder Morgan Canada, whose current Trans Mountain network forms most of its business.

On Monday, Kinder Morgan separately argued before Canada’s energy regulator that the project had been delayed due to what it said was the western city of Burnaby’s vagueness in providing timelines.

The city, through which the project passes, had disputed that view, saying officials treated Kinder Morgan impartially, and that any delay was caused by what it characterized as the company’s poorly prepared applications.

Canadian oil producers, whose landlocked product trades at a discount to the West Texas Intermediate benchmark, say they need more pipeline capacity to fetch better prices.

By 2:08 p.m. EST (1908 GMT), Kinder Morgan Canada shares were down 4.5 percent at C$16.28 on the Toronto Stock Exchange, while the benchmark energy index was up 0.3 percent.

Reporting by Ethan Lou and Alastair Sharp; Editing by David Gregorio and Jonathan Oatis