Canada’s federal government in Ottawa is likely to lose $20 billion of taxpayer money on the Trans Mountain Pipeline, according to a new report from Morningstar (MORN).
The financial services company says that Canada’s Liberal government is likely to get no more than $15 billion when it sells the Trans Mountain Pipeline, and potentially less.
The federal government paid Kinder Morgan (KMI) $4.5 billion for the oil pipeline in 2018 after the company threatened to cancel plans to triple its capacity to 890,000 barrels of oil per day.
However, the cost of tripling the pipeline’s capacity has since risen to $31 billion because of issues that include supply chain challenges.
Trans Mountain is Canada’s only pipeline that takes crude oil from Alberta to the British Columbia coast for shipping to Asia.
The government in Ottawa has said that it bought the pipeline because it considers it to be critically important to Canada’s economy and national interest.
However, Trans Mountain competes with Enbridge’s (ENB) larger network of pipelines that carries Canadian crude oil to the U.S. Gulf Coast.
Morningstar says that Ottawa should try to sell Trans Mountain to a consortium of energy companies that could absorb lower returns by expanding their existing oil facilities.
Several Indigenous groups in Canada are seeking to buy the Trans Mountain Pipeline. Pembina Pipeline (PPL) is the only established energy company to express interest in buying Trans Mountain.
The Trans Mountain Pipeline expansion is 80% complete and scheduled to begin operations in 2024.
