Sat, 09 Dec 2023

CALGARY, Canada: From early 2024, the long-delayed and controversial Canadian government-owned Trans Mountain oil pipeline expansion (TMX) is expected to nearly triple the flow of crude oil from Alberta to Canada's Pacific Coast.

The pipeline expansion, which costs U$22.81 billion, will divert barrels currently delivered to refiners and exporters in the U.S. Midwest and Gulf Coast, potentially shaking up North America's supply chain.

After the TMX expansion, U.S. Midwest oil refineries that sit along Canada's existing main oil-export route and benefited from low prices, such as BP, Citgo Petroleum, and Exxon Mobil, could pay as much as $2 more per barrel.

However, a last-minute proposed route change could delay the project by up to nine months. But once operational, Canada can transport an extra 590,000 barrels per day (bpd) to Pacific ports for delivery to U.S. West Coast and Asian refiners, where long-term demand for heavy sour crude could rise.

A Reuters Energy Information Administration data analysis showed that Canada has supplied the Midwest with all of its crude imports since 2019, meaning that Canadian oil producers are vulnerable to significant price discounts or "blowouts" when pipelines experience blockages or leaks.

Pipeline operator Enbridge, which transports most of Canada's 3.8 million bpd of crude exports to the U.S., said that once TMX opens, flows on its Mainline system will drop by up to 300,000 bpd.

Rory Johnston, founder of the Commodity Context newsletter, said the start-up of TMX could add a "buck or two" to the cost of a barrel for Midwest refiners.

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