Canada-owned Trans Mountain oil pipeline not profitable -budget officer

Canada-owned Trans Mountain oil pipeline not profitable -budget officer

June 22 (Reuters) – The Canadian government-owned Trans Mountain oil pipeline is no longer profitable after cost over-runs and delays to its expansion project, the country’s parliamentary budget officer (PBO) said on Wednesday.

A report from PBO Yves Giroux said the pipeline has a net present value of negative C$600 million (negative $463.03 million), based on the difference between Trans Mountain’s cash flows and its C$4.4 billion purchase price.

The report from the PBO, which provides independent advice to Parliament, is a blow to Prime Minister Justin Trudeau, whose government bought the pipeline in 2018 to ensure that the expansion proceeded despite protests. Expansion of other pipelines has since smoothed the flow of crude, one of Canada’s most valuable exports.

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Trudeau faces criticism that expanding the pipeline is contrary to Canada’s goals of cutting greenhouse gas emissions.

Additional delays and increased construction costs would further reduce Trans Mountain’s value, the PBO said. If Ottawa cancels the expansion, the government faces a C$14.4 billion write-off, the PBO said.

The cancellation scenario is hypothetical, and the government has no such plans, said a government source. The source added that the PBO analysis of unprofitability does not consider other economic benefits such as jobs.

Trudeau’s government has long said it will sell the pipeline once the expansion is nearly complete.

The pipeline moves up to 300,000 barrels per day of oil from near Edmonton, Alberta, to the Pacific coast in British Columbia, and the expansion would nearly triple capacity.

Industry and environmental advocates have starkly different views on the pipeline.

The expansion is critical for Canada’s oil industry, ensuring its long-term stability and providing more diverse market access, said Reg Curren, spokesperson for producer Cenovus Energy (CVE.TO).

The government should cancel the expansion and cut its losses, said Julia Levin, national climate program manager at Environmental Defense, an environmental advocacy group.

“Continuing to throw public dollars at the project would be another broken promise from a government that committed to end fossil fuel subsides,” she said.

The cost of expanding Trans Mountain has jumped to C$21.4 billion from C$12.6 billion, and its in-service date delayed by nine months to late 2023, Trans Mountain Corp said in February.

($1 = 1.2958 Canadian dollars)

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Reporting by Rod Nickel and Ismail Shakil; additional reporting by Steve Scherer in Ottawa; Editing by Chizu Nomiyama, Nick Zieminski and Leslie Adler

Our Standards: The Thomson Reuters Trust Principles.

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