Thursday , February 20 2020
Home / canada / Ottawa can pay salaries for Trans Mountain to $ 1, says parliamentary budget officer

Ottawa can pay salaries for Trans Mountain to $ 1, says parliamentary budget officer

The federal liberal government may have overpay for a pipeline project in Canada for more than $ 1 billion, the parliamentary budget officer estimates, and there is a risk that its value may fall further if there are any other delays in the construction timeline.

However, even if Ottawa overpaid, the value of the project for oil producers in Canada, and in return, the government coffers, is significant, as it will close the gap in the prices affected by the lease, the report said on Thursday.

The report notes that both the existing pipeline and the proposed expansion project are valued between $ 3.6 billion and $ 4.6 billion, an inaccurate range that limits it or far below the government purchasing price – $ 4.5 billion – or the right to money.

"The government negotiated a purchase price of a higher degree of valuation of the COB. The financial assessment of the PBO presupposes that the pipeline is built on time and on the budget."

The PBO values ​​are further complicated by the fact that they do not have a figure as to how many piping terminals and the Puget Sound pipeline are worth – other Ottawa assets as part of a transaction with former proponent, Kinder Morgan. Those associated funds are not included in the figure that the PBO generates, but officials said Thursday, if the extension is not built, the value of these properties will be low.

Nevertheless, the PBO warns that any further delay in the project, increased construction costs, or other changes in the "risk profile" threatens to significantly devalue the project, while adversely affecting the final selling price Ottawa could reach when sold another entity.

The delay of one year will reduce the project value by $ 700 million. If there are delays, beyond the planned December 31, 2021, the date of completion, the PBO says it is fair to conclude that the government will pay for the asset.

The PBO estimates that the construction of the Enlargement Project will create nearly 8,000 jobs at the top.

Impact on GDP

The true value of the Trans-Mine Enlargement Project (TMEP), however, will come from oil producers that sell much more Canadian oil at world prices. At the moment, because Canadian manufacturers are forced to sell almost all their products at US refineries, the Western Canadian selector sells at a discount from the West Tech Intermediate (WTI), a gold standard in oil prices in the United States.

"It is difficult to determine the impact of TMEP on the difference in prices between WTI and WCS scores. However, a recent PBO analysis has found that a reduction of $ 5 per barrel in this gap will, on average, result in a 0.1 percent increase in real GDP, and a 0.3% increase in nominal GDP, "said the report of the CoE.

"It will turn into an annual impact of $ 6 billion in GDP over the five-year period from 2019 to 2023."

If the expansion is not built, the Trans Mountain pipeline will cost about $ 2 billion, estimated by the PBO.

The government entered the pipeline and the planned expansion last year after Kinder Morgan cut off all essential construction costs pending the outcome of the legal issues.

B.C. Prime Minister John Horgan tried to halt his construction, and Ottawa threatened to buy the "humiliation" project.

Indigenous groups said they were inappropriately consulted by the federal government, before Prime Minister Justin Trudeau and the cabinet to give the green light project in 2016.

The Federal Court of Appeal overturned government approval for the project last August, citing inadequate consultations and environmental assessments, on the same day, Kinder Morgan's shareholders agreed to sell most of Canadian assets to the company in Ottawa.

The federal government has pledged to build the project despite its legal challenges.

Source link