Canada's 590,000 b/d Trans Mountain Expansion (TMX) oil pipeline will be full within a few years, but final tolls need to be sorted before the government can sell the project, the head of Trans Mountain said this week.
"The system is performing very consistently," Trans Mountain chief executive officer Mark Maki told a federal Natural Resources committee on 21 October. "We expect volumes to increase here in the fourth quarter, and more importantly over the next couple of years," he said. "In stages, the system will be full, we think by 2028."
The expansion project roughly tripled the capacity of the Trans Mountain system connecting Alberta crude shippers to Burnaby, British Columbia, when it was put into service on 1 May. Now at 890,000 b/d in total capacity, Trans Mountain allows greater access for producers that have historically been at the mercy of refiners in the US midcontinent and Gulf coast.
Crude now more readily moves to the US West coast, Korea, India, Japan and China, said Maki, and that has translated into higher prices since the expansion was commissioned.
"It's about $10/bl better" for Canadian producers in the current fourth quarter compared to what it historically has been, said Maki.
Trans Mountain and labor union representatives were in Ottawa to explain to members of parliament how the project's cost spiraled since it was first proposed more than a decade earlier, and importantly, if Canadians can expect to recover their investment in the federally-owned line.
"In my time in the pipeline sector, there is one thing that has really stuck with me ... that is the importance of being both a disciplined buyer and a disciplined seller," said Maki, who previously spent more than 30 years with midstream operator Enbridge. "When the time is right, Canada can sell and the outcome that they should expect is recovery of the taxpayer's capital."
"You do not act in a hurry. You take your time," said Maki.
TMX is expected to cost about C$34.2bn ($24.7bn) in Trans Mountain's latest estimate, multiples of the C$5.4bn when it was first proposed in 2013 by then-owner US midstream firm Kinder Morgan. Canada stepped in and bought the existing line and the expansion project in 2018 for C$4.5bn, with the expectation the expansion would require C$7.4bn for a total investment of about C$12bn.
How to split the bill
How much revenue the new line will generate for any future owner is unclear given an outstanding tolling dispute between the midstream company and shippers. Final tolls will not be decided until the conclusion of a Canada Energy Regulator-led (CER) hearing next year.
For now, the two sides disagree over what information will be permissible in the hearing and how much Trans Mountain is required to disclose.
Shipper requests for "all" and "every" document, version or piece of information on a subject matter are unduly broad, according to Trans Mountain, which has already produced about 15,000 documents. Of these, Trans Mountain has requested roughly 4,000 be kept confidential.
Supplier pricing, commercial information and loan agreements are among the information that, if disclosed, "could harm Trans Mountain's reputation and relationship with parties it has contracts," Trans Mountain said in its 2 October request to the regulator.
It may also hamper the midstream company's ability to negotiate similar agreements in the future, it added.
Shippers in a response on 18 October want the loan information for the highly leveraged project to be scrutinized further to determine whether it is indeed to be considered confidential.
"The Participating Shippers generally remain concerned about the proposed breadth of confidentiality designations sought by Trans Mountain in this proceeding," lawyers for Marathon Petroleum Canada wrote, in concurrence with BP, Canadian Natural Resources, Cenovus, ConocoPhillips Canada and Suncor.
At issue are what have been categorized as "uncapped" costs, many of which would fall onto the shippers who made commitments on the pipeline years earlier. Trans Mountain in December 2023 estimated uncapped costs have swelled to C$9.1bn.
Interim tolls in place have the fixed costs for a heavy crude shipper moving 75,000 b/d or more over a 20-year term at about C$9.54/bl. A 19 July filing by Trans Mountain noted that a C$1bn reduction in the uncapped costs would reduce the benchmark toll by C$0.70/bl.
Collecting, organizing and analyzing documentation will continue into spring, with an oral hearing scheduled to begin on 14 May 2025.
By Brett Holmes
https://www.argusmedia.com/en/news-and-insights/latest-market-news/2620709-canada-s-tmx-to-be-full-by-2028-trans-mountain
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