TMX Latest Cost Estimate Up 10% to $34 billion

Western Canada’s Trans Mountain Expansion Project, better-known as TMX, has experienced more than its share of setbacks over the past 10 years: environmental protests, legal challenges, financing issues, an ownership change, and even a serious flooding event in 2021. But it seems the 590-Mb/d expansion of the now-300-Mb/d Trans Mountain Pipeline (TMP) system will finally become a reality by early 2024, enabling large-scale exports of Alberta-sourced crude oil to Asian markets. There’s a catch, though. The project’s long delays and other issues resulted in massive cost overruns that are now being reflected in the preliminary tolls for the soon-to-be-combined Trans Mountain system. The proposed toll increase is so large that it will cost a similar amount to ship heavy crude oil to tidewater on Trans Mountain as it would on the competing Enbridge system to the U.S. Gulf Coast for “re-export,” despite the latter being three times the distance. In today’s blog, we discuss the history of the Trans Mountain expansion, its cost overruns and the calculations that went into the proposed tolls — the kicker being that those tolls could end up being even higher.

It seems that, once again, Canada is struggling to build crude oil pipeline export capacity fast enough to keep pace with production growth. The latest setback came with the announcement that completion of the Canadian government-owned Trans Mountain Expansion (TMX) will be delayed until the third quarter of 2023 and that the 590-Mb/d project will cost almost twice as much as previously estimated. The latest six-to-nine-month delay appears to set the Canadian oil industry on a path to exhausting its spare export capacity by later this year. And that’s not good news for producers. In today’s RBN blog, we consider this latest TMX announcement and what it might mean for pipeline constraints and heavy oil price differentials.

The 590-Mb/d Trans Mountain Expansion (TMX) project, which is inching closer to its planned early 2024 completion, has been one of the most eagerly anticipated energy infrastructure projects in recent Canadian memory. Preliminary tolls for shipping crude on the expanded pipeline system, submitted to the Canada Energy Regulator (CER) in June, are multiples higher than the tolls currently charged on the original 300-Mb/d Trans Mountain Pipeline (TMP), possibly undermining oil producers’ economics for shipping and exporting crude on the combined 890-Mb/d system. However, the higher tolls are not the only concern. Serious logistical challenges remain in the form of restricted tanker sizes, a circuitous route for ships traveling from the open ocean to the Westridge export terminal near Burnaby, BC, and even a very tight passage under two bridges, all of which will add costs and time for each exported barrel. In today’s RBN blog, we provide more details on the complexities surrounding crude oil exports via the Trans Mountain pipeline system.