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Trans Mountain Expansion Set To Raise Crude Prices For Midwest Refiners

The expansion of Canada’s Trans Mountain oil pipeline is expected to raise the prices U.S. refiners in the Midwest pay for Canadian oil by up to $2 per barrel, analysts tell Reuters.

The Trans Mountain Expansion project, expected to triple the volume of crude shipped from Canada’s oil sands to its Pacific Coast, would intensify competition for Canadian heavy crude in the Midwest, where refiners have so far received discounted crude from Canada.  

But the expansion of the Trans Mountain oil pipeline would divert crude to the Pacific Coast for exports to the U.S. West Coast and potentially Asia, depriving the Midwest of some supply and boosting the prices for crude there, according to the analysts.

One oil trader based in Calgary told Reuters, “They will be competing for barrels that no longer transit through their region.”

Currently, the Trans Mountain Expansion project is expected to start up early next year, but further delays cannot be ruled out after years of setbacks.

The Trans Mountain expansion aims to triple the capacity of the original pipeline that carries Alberta crude through British Columbia to the west coast of Canada—to 890,000 barrels per day (bpd) from 300,000 bpd.

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.

Fierce opposition in British Columbia has forced Kinder Morgan to reconsider its commitment to expand the Trans Mountain pipeline. 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 94% mechanically complete with around 42 kilometers of pipe left to install as of the middle of August 2023.

However, the start-up of the expanded pipeline could be set back by nine months unless regulators approve a proposed change of its route.  

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By Tsvetana Paraskova for Oilprice.com

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  • Ian St. John on September 19 2023 said:
    This is all predicated on the idea that we will have customers for TMX (none that I know of). China prefers Saudi Arabia. The shipping of oil to the Gulf Coast would be problematic because of the drought in the Panama canal and a shortage of Aframax tankers. There might be a small market in the US west coast (as Alaska dries up) but I don't see it as affecting prices for the oil in the mid USA. The myth of a 'price discount' was debunked long ago. The difference in price is because of lower grade and transportation costs.
  • steve Clark on September 19 2023 said:
    Will most likely result in a price increase of around $10/bbl

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