Analysis-Trans Mountain oil pipeline expansion pushes rivals to cut rates, for now By Reuters

By Arathy Somasekhar

HOUSTON (Reuters) – Pipelines that historically carry Canadian crude to the U.S. are cutting rates and looking to deliver different grades due to growing competition from the newly expanded Trans Mountain pipeline.

The moves will temporarily reduce the cost of shipping some of Canada’s heavy crude oil to the Midwest and US Gulf Coast next month. US imports of Canadian crude hit a record in July as Trans Mountain ( TMX ) expansion volumes rose.

Deliveries on the TMX began in May, sending up to 890,000 barrels per day (bpd) to Canada’s Pacific Coast. About 80% of volumes are contracted, leaving 20% ​​available for spot shipments.

With more oil moving on the TMX, Canadian pipeline operator Enbridge (NYSE: ) said in August it would cut its September rates by 11 percent per barrel on heavy crude moving on its main system. The 3 million bpd system delivers most of Canada’s crude oil exports from Edmonton to the US and is one of TMX’s main competitors.

The company is not rationing pipeline space for September for the first time in over a year, with sufficient capacity available to cover all nominated barrels.

Enbridge said it expects the Mainline to be well utilized for the rest of the year, attributing the decline in volumes to routine oil producer and refinery maintenance.

“We’re starting to see the impact of TMX happening for the Mainline and therefore the systems that carry Canadian barrels to the US Gulf Coast,” said Dylan White, a North American crude oil market analyst with researcher Wood Mackenzie.

Enbridge’s 190,000 bpd Spearhead and 720,000 bpd Flanagan South pipelines that deliver crude from Mainline to Oklahoma’s Cushing storage facility could likely lose volumes, analysts said. The 950,000 bpd Seaway, jointly owned by Enbridge and Enterprise Products Partners (NYSE: ), which carries oil from Cushing to the US Gulf Coast, could also see lower flows.

The Seaway and Flanagan pipelines remain well-utilized, Enbridge said.

Pipelines such as MPLX’s (NYSE: ) Capline, a key pipeline for Canadian heavy crude, will likely carry more light crude from North Dakota’s Bakken oil field to offset the loss of Canadian heavy crude, analysts said. The 1.5 million bpd pipeline was once the largest crude oil pipeline in the US before being reversed in 2021 to carry crude north to south. MPLX declined to comment on Capline’s product moves.

THE SHORT-TERM IMPACT

Delays in completing TMX have given Canadian producers plenty of time to ramp up supply, and volumes on rival pipelines are likely to increase as Canadian oil production is expected to rise rapidly.

“A combination of TMX coming online later than expected and increasing Canadian supply … increased overall utilization on the broader Canadian outbound pipelines, even as TMX expanded its total capacity,” it said Wood Mackenzie’s White.

Production will rise by about 500,000 bpd in 2025 from 2023, offsetting the additional capacity added by TMX, according to analysts at energy infrastructure firm East Daley Analytics.

Excess duct space will be filled relatively soon, said Kristy Oleszek, director of energy analysis at East Daley.