(Reuters) – TC Energy Corp said on Tuesday it would proceed with the construction of the long-delayed $8 billion Keystone XL pipeline project after securing a $1.1 billion equity investment from the Alberta government, extending a lifeline to Canada’s oil sands industry.
Alberta, home of the world’s third-largest oil reserves, has struggled for years as congested pipelines weakened prices and forced the provincial government to curtail production. The province. Many companies in the province have had to cut capital spending as well due to the twin shocks of the Saudi-Russia oil price war and the fast-spreading coronavirus outbreak.
Imperial Oil Ltd on Tuesday became the latest producer to retrench, saying it would halt share repurchases and cut 2020 spending by 30%, or C$500 million ($351.00 million).
The Keystone XL pipeline, which would carry 830,000 barrels per day of crude from Alberta to the U.S. Midwest, has been delayed for more than a decade by opposition from landowners, environmental groups and tribes.
The investment in Keystone XL by the Western Canadian province would substantially cover planned construction costs through the end of 2020, TC Energy said.
The remaining $6.9 billion is expected to be largely made in 2021 and 2022 and funded through a credit facility and an investment by TC Energy, the company said.
In a statement, oil-rich Alberta said it would also provide a $4.2 billion loan guarantee and that construction on the Canadian portion of the line could start as soon as this week.
“We cannot wait for the end of the pandemic and the global recession to act,” Alberta Premier Jason Kenney said in a statement.
Calgary-based TC Energy expects to buy the Alberta government’s stake once the project is in service. It also plans to raise about $1 billion by selling some of its shares.
The company, which had planned to start mobilizing heavy construction equipment in February, said last month that there was too much uncertainty to commit immediately to the project.
Alberta’s move is the second direct investment by a Canadian government in a major pipeline project. Canada in 2019 paid C$4.5 billion to acquire the Trans Mountain pipeline and expansion project, despite formidable political and environmental opposition.
Last year, private equity firm KKR & Co Inc teamed up with Alberta Investment Management Corp to jointly buy a 65% stake in TC Energy Coastal GasLink Pipeline.
($1 = 1.4241 Canadian dollars)
Reporting by Arathy S Nair in Bengaluru; additional reporting by Jeff Lewis in Toronto Editing by Maju Samuel, Anil D’Silva and David Gregorio