March 12, 2024 [Global News]- After being hamstrung for years by a lack of export capacity, Canada’s oil industry will have reason to celebrate when the much-anticipated Trans Mountain pipeline expansion comes online, expected to be sometime this spring.
But the party may be short-lived, as the more-than-$30-billion pipeline is expected to quickly fill up — returning Canada’s oil producers to a “Groundhog Day” scenario of restricted growth and depressed prices.
“I think the industry wanted to believe Trans Mountain was the answer. They wanted everybody to believe that having this new capacity was going to free them from this problem,” said Richard Masson, executive fellow with the University of Calgary’s School of Public Policy. “But we’ve never really been free from this problem.”
Export issues have been a thorn in the side of Canadian energy companies for years, due to a lack of pipeline capacity from Alberta’s oilsands region to coastal tanker loading facilities.
That shortage of pipeline space, combined with refinery and transportation costs, is the reason Canadian oil producers typically take a price discount on their product compared to U.S. competitors.
In a particularly dramatic example, the discount known as the Western Canada Select differential widened so much in 2018 — to US$50 a barrel — that the Alberta government moved to curtail oil production in the province until prices improved.
While the situation has moderated since then, in part to due to the 2021 completion of Enbridge Inc.’s Line 3 pipeline replacement project, the discount on Canadian oil compared to the U.S. benchmark West Texas Intermediate has continued to hover between US$18 and $20 on average in recent years.
The Trans Mountain pipeline expansion is expected to change that, by making it easier for Canadian oil to get to Asian markets via the West Coast.
The high-profile project, which began construction in 2019 and is owned by the federal government, will increase the existing Trans Mountain pipeline’s capacity by 590,000 barrels per day to a total of 890,000 barrels per day. And with that near-tripling of export volumes, comes the ability to turn on the taps when it comes to crude.
Many companies have already begun to ramp up production in preparation, and 2024 is expected to be a boom year for oil output in this country.
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