The cost of a major construction project to build a rail line that will run under Sydney Harbour is likely to blow out by up to $3 billion, the NSW government has admitted.

The 30km Metro City and Southwest rail project was expected to cost $12.5 billion, but additional costs mean it could now be up to $15.5 billion.

“I am sorry it happened this way but it is very much market forces at play in terms of the build,” Transport Minister Andrew Constance told The Sydney Morning Herald on Friday.