Canadian oil producers beset by years of limited pipeline capacity are hoping to get better prices for their crude when the Trans Mountain pipeline expansion begins next year, opening them to new markets in Asia.
The expansion project, which Prime Minister Justin Trudeau’s government bought for C$4.5 billion ($3.3 billion) in 2018, will reduce oil sands producers’ dependence on U.S. refineries that currently forces them to accept discounted prices for their crude oil. A little more than two years after the 2021 commissioning of Enbridge Inc.’s Line 3, the Trans Mountain expansion has, at least temporarily, removed pipelines from the worry list for a long-time industry hampered by limited shipping options.
“Being able to send our barrels to more markets is a huge opportunity for Canada,” Canadian Natural Resources Ltd. chief financial officer Mark Stainthorpe told the Bank of Montreal and Canadian Association conference last week of Oil Producers.
CNRL, the country’s largest oil producer, will ship 94,000 barrels a day on the expanded Trans Mountain when it begins operations in the first quarter, representing about 16 percent of the line’s total available space. The company is looking for that crude in the Asian and US West Coast markets, Stainthorpe said.
The pipeline may also allow oil sands companies to increase production. Imperial Oil Ltd., which is controlled by Exxon Mobil Corp., expects to finish a 15,000-barrel-a-day expansion of its Cold Lake facility this year ahead of schedule, Chief Executive Brad Corson said on the conference call. The company is also considering restarting paused expansion projects in the area as pipeline constraints ease.
The Trans Mountain expansion will more than double the capacity of the existing line to 890,000 barrels per day. Costs for the project, which runs from Edmonton to shipping terminals near Vancouver, have increased fivefold to C$30.9 billion from an initial estimate of C$5.4 billion.
The project will also benefit producers who don’t ship to the line, said Craig Bryksa, CEO of Crescent Point Energy Corp.
“Volumes will shift to that and create some capacity in the other existing infrastructure, which ideally helps our spreads in Western Canada,” Bryksa said in an interview. “So I see this as a big win for the basin over time.”
One company not expected to benefit from the shutdown is Enbridge Inc., which operates competing crude pipelines out of Alberta. CEO Greg Ebel said the company is talking to shippers on its Mainline system about options it can offer them, including opportunities to increase capacity and the potential for new storage on the US Gulf Coast .
“Customers recognize that something like TMX would be very difficult to scale,” Ebel said in an interview. “The mainline has additional opportunities for expansion over time, has different elements and obviously touches many more markets.”
More broadly, the Trans Mountain startup takes pipelines off the menu of top concerns right now and allows producers to think about new ways to improve their business, said Canadian Association of Petroleum Producers president Lisa Baiton , in an interview.
“Leaving has always been a challenge for Canada,” he said in an interview. “But people are moving away from broad discussions about exit challenges and are more thoughtful and strategic about how we can make Canadian products competitive.”
