As details emerge about

Alberta’s new pipeline agreement

with Ottawa, analysts and capital market veterans are questioning whether

Canada’s pipeline companies

—  and their investors — will have the appetite to risk

another mega-project

in British Columbia.

“These are very tough projects to get built and today, there’s no private proponent,” TD Cowen director and equity analyst Aaron MacNeil said. “There’s a great national conversation going on about the strategic importance of a

West Coast pipeline

, but nobody seems to be questioning what would make this project attractive to a proponent.”

Companies like

Enbridge Inc., South Bow Corp. and TC Energy Corp. are prioritizing quick, low-risk projects or expansions of existing assets that deliver reliable returns, MacNeil said.

“If I’m an Enbridge, why would I stop doing that to take on a long, high-regulatory-risk build? What’s in it for the pipeline company?”

The long-awaited memorandum of understanding, unveiled Thursday, in part outlines conditions for the Carney government to offer political support for a new oil pipeline to the West Coast.

A senior government official confirmed earlier news reports that the agreement includes a potential carve-out to the federal oil-tanker ban on B.C.’s northern coast and the elimination of Ottawa’s proposed oil-and-gas emissions cap. In return,

Alberta must implement stricter carbon pricing

and back a major carbon-capture project, among other things.

But despite broad enthusiasm in the oilpatch at the idea, experts who analyze capital flows in the sector warn that it may still be unlikely a private-sector proponent steps forward. Memories are still fresh and debt is still lingering from the troubled Trans Mountain pipeline expansion project, whose price tag exploded from $7.4 billion to more than $34 billion.

Kinder Morgan Inc.’s struggles with the

B.C. government

and local authorities during construction of TMX — which ultimately led the U.S. pipeline giant to sell the project to Ottawa in 2018 — remains a cautionary tale, Randy Ollenberger, managing director of oil and gas equity research for BMO Capital Markets, said Wednesday.

“If Kinder Morgan had remained behind TMX and the costs ballooned to $34 billion, they would’ve went bankrupt,” Ollenberger said. “So Enbridge, Trans Mountain Corp., TC or South Bow, none of these companies are going to step up and build anything unless they know what the cost is going to be.

“There’s no publicly traded pipeline company that’s going to step up and say, ‘I’ve got a blank cheque. It’s going to cost $50 billion, $40 billion, I don’t really care’,” Ollenberger said.

While the political clamour over Alberta’s pipeline deal with Ottawa has been building, midstream firms have been quietly previewing capital spending plans for next year focused on “brownfield” projects, which involve expanding and de-bottlenecking existing infrastructure.

Getting a private proponent to pivot to lead another mega-project could require incentives or risk-sharing from government, including revenue backstops or protections against cost-overruns and delays,

MacNeil

wrote in a recent TD Cowen note.

“We believe that a private proponent would have to be incentivized to pursue a project of this nature,” the note said.

Yet many of the same analysts and investors argue the underlying economics remain strong for a new export pipeline linking growing production in Western Canada

to Asian markets

— with some arguing that investor reluctance stems from risk, not from lack of demand.

Canada’s heavy crude sits at the low end of global supply costs, Ollenberger noted in recent sector outlook, adding that oil prices in the range of US$60 to $65 per barrel could justify new investment in pipeline capacity.

He said Western Canada’s oil output could grow by as much as 500,000 barrels a day — and potentially triple under the right conditions — but only if the cost of getting that oil to market remains competitive.

If pipeline construction costs ballooned, however, analysts warn the resulting higher tolls would collapse the business case for a new line.

“There hasn’t been a pipeline proponent, and there hasn’t been a pipeline, not because there isn’t a market for this stuff, but because these are still viewed as tremendously risky,” energy economist Peter Tertzakian said.

But at a competitive construction costs, a new pipeline would let Canada tap into the growing network of complex refineries in China and Southeast Asia built to run heavy crude, he said.

“The reality is this stuff is actually in quite a bit of demand in Southeast Asia, and they’re willing to pay world prices for it. So there is an imperative to get on with this, and the timing is right.”

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• Email: mpotkins@postmedia.com