YELLOWKNIFE - Imperial Oil announced Monday that costs to build the Mackenzie Valley pipeline have jumped to $16.2 billion from $7.5 billion in 2004.

The gas-gathering system is now expected to cost $3.5 billion, the pipeline itself $7.8 billion, and developing the anchor fields another $4.9 billion.

Seismic and drilling activity is performed on the proposed route on behalf of the Mackenzie Valley Pipeline Producers Group. - photo courtesy of Imperial Oil

"We have said from the outset that this is an economically- challenged project," said Pius Rolheiser, spokesperson for Imperial Oil.

"However, we remain hopeful that the project will be built."

Three factors can be blamed for the increase.

"Approximately 50 per cent of the increase is attributed to cost escalation," Rolheiser said.

This includes materials, equipment, steel, fuel and labour.

An additional 40 per cent of the price increase comes from "improved understanding and refinement of execution planning and project definition."

There have been several key engineering components added or changed since Imperial filed its regulatory application in 2004.

"Delays and the complexities in the regulatory and land access processes" are blamed for the final 10 per cent increase. On Monday Imperial also said production start-up will begin no sooner than 2014.

In 2004, Imperial anticipated construction on the pipeline would begin in 2010 or 2011. At the time, Imperial said this target depended on a timely regulatory process, something that has not happened.

"The Aboriginal Pipeline Group is disappointed in the delay," said Viola Cli, the group's communications administrator.

"It's not good for the Aboriginal people of the North."

Cli declined to comment further, adding the group was reviewing the new information.