Trans Mountain Pipeline Unlikely To Ship Canadian Oil To Asia

The additional Canadian crude volumes that will be transported from Alberta via the expanded Trans Mountain oil pipeline are likely to stay in North America and end up on the U.S. West Coast instead of in Asia, as planned years ago when the project was designed, traders have told Reuters.

The Trans Mountain Expansion project has been dragging on for years and faces environmental opposition and rising construction costs.

Initially, the pipeline expansion was set to help Canada export its heavy crude oil to Asia via tankers from the Canadian West Coast. But as the expansion project took years to clear permitting, financial, and construction hurdles, the global crude oil flows changed with the Russian invasion of Ukraine.

Major Asian buyers, including China and India, are snapping up record volumes of discounted Russian crude, which is cheaper than Canadian heavy crude, even if the Alberta grade trades at a discount to the U.S. benchmark, WTI Crude.

“A lot of our lunch has been eaten by the Russians and Middle Eastern countries like Iraq,” a Canadian trader told Reuters.

Fierce opposition in British Columbia has forced Kinder Morgan to reconsider its commitment to expand the Trans Mountain pipeline, which would increase the daily capacity of the pipeline to 890,000 barrels per day (bpd) from 300,000 bpd. So the Government of Canada reached an agreement with Kinder Morgan back in 2018 to buy the Trans Mountain Expansion Project and related pipeline and terminal assets.

Construction on the Trans Mountain Expansion Project was approximately 82% complete as of the end of March, TMC said in May.

Trans Mountain anticipates mechanical completion of the project to occur at the end of this year, while commercial service is expected to occur in the first quarter of 2024. The pipeline has long-term contractual commitments for 80% of 890,000-bpd capacity, the corporation said.

But most of the crude will likely still end up in the United States because of Asia’s buying spree of cheap Russian oil, according to analysts.

By Tsvetana Paraskova for Oilprice.com

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