The Trans Mountain expansion changes North American oil flows and pipeline taxes

The Trans Mountain Expansion Project, now finally complete after years of delays, is expanding market access for Canadian oil producers and is set to drive up the price of Canada’s heavy crude for years to come, top executives at major energy companies say.

The expanded pipeline triples the capacity of the original pipeline to 890,000 barrels per day (bpd) from 300,000 bpd to transport crude oil from the Alberta oil sands to British Columbia on the Pacific coast.

The expanded pipeline provides increased transportation capacity for Canadian producers to get their oil out of Alberta and the Pacific coast and on to the US West Coast or Asian markets.

TMX has reserved 20% of its capacity – or 178,000 bpd – to non-committal customers or spot shippers.

As a result of increased competition from Trans Mountain, other pipeline operators — including Enbridge, operator of North America’s largest crude oil pipeline network, the Mainline — cut rates to carry crude on their network in September. Enbridge will charge companies lower fees to ship heavy crude oil from Hardisty, Alberta, to Texas on Enbridge’s networks, according to company documents cited by Bloomberg.

As a result of TMX becoming operational, crude trade flows are expected to change, Wood Mackenzie analysts Lee Williams and Dylan White wrote in July.

“Wood Mackenzie data suggests that increased westward flows will moderate in volumes moving on other routes in western Canada, particularly rail and Enbridge’s mainline system,” they said.

As Canadian producers continue to ramp up output, excess pipeline capacity on the networks that carry Canadian crude to U.S. demand centers should be filled fairly soon, according to analysts.

By Tsvetana Paraskova for Oilprice.com

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