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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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U.S. Refiners Should Brace for Trans Mountain Pipeline Launch

  • Following the news that Trans Mountain Corporation will start filling the expanded pipeline in February, with first crude to be loaded from Vancouver in April, Canadian crude prices jumped to the narrowest discount to WTI since August 2023.
  • U.S. refiners used to cheap Canadian crude will need to start budgeting more for the commodity from this spring.
  • Canadian oil producers are preparing for the 890,000 bpd in takeaway capacity growth.

When Kinder Morgan first announced its plans to expand the capacity of the Trans Mountain oil pipeline from 300,000 bpd to 890,000 bpd, it probably thought it was another major project.

Several years later, the company had given up on the project and sold it to the Canadian federal government for less than $4 billion. For a long time, it seemed like Trans Mountain would never be completed, plagued by opposition and regulatory snags.

Despite all this, it seems the pipeline is about to go into operation this year. And U.S. refiners used to cheap Canadian oil might need to reach deeper into their pockets to keep buying it.

The idea behind the Trans Mountain expansion was to turn Canada into a true oil exporter, reaching international markets rather than just the U.S. market, massive as it is. One reason this took so long was that the government of the province that was to host most of the pipeline was dead against it.

The John Horgan government was very environmentally minded. It would rather have Alberta stop all oil flows to British Columbia than endure the construction of the expanded Trans Mountain pipeline. That set back the project by months, and so did environmental protests against the pipeline.  Related: Oil Prices Drop, Recover on Gaza War Ceasefire Proposal Rumors

Amid all this, the discount at which Canadian crude normally trades to WTI deepened and hardened. Canadian oil was going to the United States—all the way to the Gulf Coast—and only from there could it reach international markets. It was a complicated situation.

Then, when Kinder Morgan had enough and sold the project, the Trans Mountain expansion got a new lease of life—ironically, from a federal government that has made no secret of its distaste towards the oil industry. And it paid for that distaste. From an original $3.4-billion price tag, the Trans Mountain expansion bill swelled to over $23 billion.

Inflation and supply chain problems were among the reasons for the sixfold increase in the cost of the project, as were construction challenges due to the geology along the route of the pipe. Oil producers have not exactly welcomed the cost overruns—there were suspicions that to make up for these, Trans Mountain Corporation would charge them higher fees for carrying their crude.

Even so, producers began ramping up production in anticipation of the launch. Canadian Natural Resources said earlier this year that it would boost output in 2024 by 40,000 barrels of oil equivalent daily. Cenovus Energy announced plans to spend more on production growth as well. Oil producers are preparing for that 890,000 bpd in capacity.

Prices have responded, too. Following the news that Trans Mountain Corporation will start filling the expanded pipeline in February, with first crude to be loaded from Vancouver in April, Canadian crude prices jumped to the narrowest discount to WTI since August 2023. The current discount is about $16 per barrel.

This means that U.S. refiners used to cheap Canadian crude will need to start budgeting more for the commodity from this spring—assuming the project does not hit yet another snag. You never know, after in September the Canadian Energy Regulator gave TMC the go-ahead to change the route of the expanded pipe due to challenging terrain.

Just a month later, the same CER ordered TMC to stop work on the pipeline on the grounds of non-compliance with environmental and safety regulations. A month later, the regulator decided it could not allow TMC to go ahead with the route alternation after all because of opposition from the Indigenous community through whose land that section would pass. By December, however, the CER had changed its mind and granted TMC the permit it needed to continue work on the pipeline.


These sorts of setbacks made it really hard to believe the Trans Mountain pipeline will indeed see the light of day as an operating pipeline, but it seems it might happen after all. And that means more expensive oil for U.S. refiners. They’re about to encounter some international competition for Canadian crude.

By Irina Slav for Oilprice.com

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  • George Doolittle on February 01 2024 said:
    Global market that runs on natural gas now not that oil still isn't of great importance and value just not much of energy value compared to so many other products that actually do supply that for the USA anyways. Shipping oil over a vast distance is hardly free as well with the nearest refineries to this pipeline still in the USA West Coast actually. Might see a big market in Japan and Korea tho absolutely especially Korea with its massive nuclear fleet there.
  • Mamdouh Salameh on February 02 2024 said:
    Rather than being forced to sell its crude at prices dictated by US refiners, the completion of the capacity expansion of the Trans Mountain Pipeline to 890,000 barrels a day (b/d) by February and its loading in April in Vancouver will enable Canada to become a truly international oil exporter and charge higher prices for whatever volumes it sells to American refiners.

    It will prove a turning point for the Canadian ooil industry.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • Ian St. John on February 04 2024 said:
    The hype is that tar sands oil will be able to compete globally. The reality is that the globe can buy the oil from the original TM pipeline (and has) but that it is too expensive to compete globally. Only the USA will pay the premium to have a domestic source of heavy oil.

    There was only ONE year that China bought more than one tanker (Aframax, partially loaded to pass through vancouvers shallow channels) and that was when the price crashed to $13/bbl due to overproduction. They bought eight aframax loads that year and that year only.

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