The federal liberal government may be worth $ 1 billion for the Trans Mountain gas pipeline project, estimated by the parliamentary budget, and there is a risk that its value could fall further if there is a further delay in the building timetable.
But even if Ottawa had paid too much, the value of the Canadian oil producers project and government treasury is considerable, as it closes a price gap that damages the oil area, the parliamentary budget office said on Thursday.
The report states that the existing gas pipeline and the proposed expansion project are priced between 3.6 billion and 4.6 billion dollars, an inaccurate range that is either fluctuating significantly below the government's purchase price – $ 4.5 billion or directly for the money.
"The government has negotiated the purchase price at the higher end of the PBO valuation band." PBO's financial estimate assumes that the gas pipeline is built on time and budget. "
The PBO is further complicated by the fact that they have no indication of how many pipeline terminals and Puget Sound Pipeline – the other assets of Ottawa acquired as part of a transaction with a former bidder, Kinder Morgan – is worth it. These related assets are not included in the number generated by the PBO, but the officials said on Thursday, if the expansion is not built, the value of these features would be low.
Regardless of this, PBO warns that further project delays, rising construction costs, or other changes in "risk profile" threaten to devalue the project, while negatively affecting the final sales price that Ottawa could get when it finally sold it to another entity.
An one-year delay would reduce the value of the project by $ 700 million. If a delay occurs, after the scheduled completion date of December 31, 2021, the PBO said it was fair to conclude that the government would overpay for this property.
The PBO estimates that the expansion of the project would create almost 8,000 jobs at its peak.
Impact on GDP
The real value of the Trans Mountain Expansion Project (TMEP), however, will be derived from oil producers who sell much more Canadian oil at world prices. Currently, as Canadian manufacturers are forced to sell virtually all their products to US refineries, Western Canadian Select sells a discount at West Texas Intermediate (WTI), a gold standard in the US oil appreciation.
"It is difficult to determine the impact of TMEP on the price difference between WTI and WCS, but the recent PBO analysis has shown that a $ 5 reduction per barrel in this gap would mean, on average, 0.1% real GDP growth and 0.3% nominal GDP growth , "says the PBO report.
"This would have an annual impact on GDP of $ 6 billion over the five-year period from 2019 to 2023."
If the expansion is not built, the Trans Mountain gas pipeline would cost about $ 2 billion, PBO estimates.
The government entered the gas pipeline and planned expansion last year after Kinder Morgan stopped all necessary construction spending until the legal issues were resolved.
BC. Prime Minister John Horgan tried to stop his construction and asked Ottawa to join and buy the project to "exchange" it.
Indigenous groups said their federal government was inadequately consulted before Prime Minister Justin Trudeau and the cabinet showed a green light project in 2016.
The Federal Court of Appeals canceled approval of the Cabinet for the project last August, citing insufficient consultation and environmental assessment, on the day that Kinder Morgan shareholders agreed to sell most Canadian assets to Ottawa.
The federal government has promised to build the project despite legal problems.