By the time Yukon Energy’s liquefied natural gas power plant starts pumping power in June it will have cost nearly 25 per cent more than expected.
When the project was announced in July of 2013, the anticipated capital cost was $34.5 million. Today, the costs are expected to total $42.9 million, a difference of more that $8 million.
Andrew Hall, president of Yukon Energy, said unanticipated requirements from Yukon government’s oil and gas branch set the project back and resulted in additional costs.
The regulator required the corporation to redesign its containment pit, which would hold leaking LNG in the event of an accident.
“That meant a whole bunch of re-work, redesign, which not only delayed the project probably three months or so, but it also incurred a whole bunch of extra costs,” said Hall.
It also pushed construction into the winter months, which can be more expensive, he said.
“Overall we had a pretty mild winter, as you know, but we did have a couple of cold snaps,” said Hall. “When the temperature gets below about -25, it gets pretty difficult to work outside, and that sort of slowed things down as well.”
Finally there were some delays in the delivery of some “final bits and pieces,” including some of the electrical wiring.
“When you’re at the end of construction, any small delay like that has a direct knock-on effect on the whole project overall,” he said.
Those extra costs will ultimately be paid by consumers.
“Ultimately the project gets put into rate base, and the next time we go before the Yukon Utilities’ Board, it gets added to our assets and it’s paid for over its operating life, ultimately through electrical rates,” said Hall.
But despite the increase in capital costs and the crash in oil prices, Yukon Energy still believes that customers will see savings compared to if the corporation had stuck with diesel, he said.
“Even though the price of oil just dropped, the price of natural gas just dropped as well,” said Hall.
“Our numbers show that the business case is still there, so we’re still confident that economically it was a better choice than going with a conventional diesel back-up generator.”
Today, LNG delivered to Whitehorse costs about 25 per cent less than the equivalent amount of diesel, he said.
The plant, located along Robert Service Way in Whitehorse, is in the final stages of construction.
“The final push is just around some of the electrical wiring and some of the instruments, the sensing – the gate to the plant is getting finalized,” he said.
Through the month of May the project will move into the commissioning phase, which will involve turning on the various components of the plant, one section at a time.
The first shipment of LNG is expected in mid-May, said Hall.
Jacqueline Ronson at email@example.com