Finding qualified workers to build the massive Rockies Express Pipeline (REX) has pushed the cost of the eastern leg of the project up 11%, or $500 million, Kinder Morgan Energy Partners (KMP) confirmed last week.
In a Securities and Exchange Commission (SEC) 10-K filing Tuesday KMP noted that REX "is an approximate $4.9 billion, 1,679-mile natural gas pipeline system..." Previous filings and news releases had indicated that the cost of REX would be $4.4 billion.
Spokesman Joe Hollier told NGI the higher costs relate to the as-yet unbuilt portion of REX-East. Although steel prices and other building-related materials costs are higher than when REX construction began, Hollier said the increased estimate was labor-related.
"This is more of an issue of costs in the workforce, the higher costs are along those lines," Hollier said. "It's hard to find certified, very good welders. They are hard to come by."
Hollier said KMP and its REX partners, Sempra Inc. and ConocoPhillips, already had built the construction materials into the costs of the pipeline. However, labor costs today are at a premium, he said.
"There's a lot going on in a project like this," Hollier said. "And this is for a portion of the pipe yet to be built."
The project is being completed in three phases: a 327-mile, $745 million pipe running from the Meeker Hub to the Cheyenne Hub with a nominal capacity of 500 MMcf/d; a 713-mile, $1.6 billion pipe from the Cheyenne Hub to an interconnect in Audrain County, MO, transporting up to 1.5 Bcf/d; and a 639-mile, $2.6 billion pipe from Audrain County to Clarington, OH. Service on the second phase, the REX-West Project, ramped up in January.
Full service on the REX-West system is expected to begin in mid-March, Hollier said.
The SEC filing noted that KMP spent $1.6 billion for both REX and its Midcontinent Express gas pipe projects in 2007.
"Our capital expansion program will continue to be significant in 2008 as we expect to invest $3.3 billion in expansion capital expenditures (including our share of capital expenditures for both the Rockies Express and Midcontinent Express natural gas pipeline projects), which will help drive earnings and cash flow growth in 2009 and beyond," the filing said.
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