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Feb 12 (Reuters) - Enbridge Inc on Friday forecast higher costs for its long-contested Line 3 pipeline replacement project, citing regulatory and permitting delays, winter construction and COVID-19 protocols, among other reasons.
Line 3, built in the 1960s, ships crude from Alberta to U.S. Midwest refiners, and carries less oil than it was designed for because of age and corrosion. Replacing the pipeline would allow Enbridge to roughly double its capacity to 760,000 barrels per day.
While the Canadian portion is complete, Enbridge has run into repeated obstacles in Minnesota, where reviews have lasted for about five years.
The updated cost comes in the wake of U.S. President Joe Biden cancelling the permit needed to build TC Energy Corp’s Keystone XL oil pipeline, a blow to Canada’s oil sector.
Enbridge now estimates capital costs for the Line 3 replacement project, including the Canadian segment already in service, at $8.18 billion up from $7.08 billion. The increased costs are on the U.S. portion of the pipeline.
Calgary, Alberta-based Enbridge expects to put the pipeline into service in the fourth quarter.
The company reported lower than expected fourth quarter earnings and said volumes on its liquids pipelines were impacted by reduced refinery demand. The COVID-19 pandemic battered fuel demand worldwide and Enbridge CEO Al Monaco said the recovery remains uncertain.
“Despite positive indicators early in 2021, the pace of recovery is still unknown as COVID-19 cases remain high in many parts of the world,” he said in a statement.
On an adjusted basis, Enbridge earned 56 Canadian cents per share, while analysts had expected 61 Canadian cents per share, according to IBES data from Refinitiv.
The company is locked in a dispute with Michigan about its aging Line 5 pipeline, and Monaco reiterated Enbridge will keep the pipeline running despite orders from the state governor to shut it down.
$1 = 1.2738 Canadian dollars Reporting by Arundhati Sarkar in Bengaluru and Nia Williams in Calgary; Editing by Sherry Jacob-Phillips, Shailesh Kuber, Jan Harvey and David Gregorio