Alberta
Start-up of Trans Mountain expansion ‘going very well’ as global buyers ink deals for Canadian crude
A worker at Trans Mountain’s Burnaby Terminal. Photo courtesy Trans Mountain Corporation
From the Canadian Energy Centre
Chinese refiner pays about US$10 more for oil off TMX compared to sales value in Alberta
Canada’s oil sands producers are “back in the limelight” for investors following completion of the Trans Mountain pipeline expansion, according to a report by Enervus Intelligence Research.
For the first time in the better part of a decade, there is now breathing room on the system to ship all of the oil producers are able to sell off the coast of B.C.
Up until this May, Trans Mountain was regularly overbooked. Not anymore.
The crude carrier Dubai Angel picked up the first shipment from the long-awaited expansion on May 22, setting sail for China and a customer of oil sands producer Suncor Energy.
Analysts estimate Trans Mountain loaded 20 vessels in June, compared to a pre-expansion average of five per month.
“You’re seeing multiple buyers. It’s going very well,” said Phil Skolnick, managing director of research with New York-based Eight Capital.
“You’re seeing the exact buyers that we always thought were going to show up, the U.S. west coast refineries and as well as the Asian refineries, and there was a shipment that went to India as well.”
The “Golden Weld” in April 2024 marked the mechanical completion and end of construction for the Trans Mountain expansion project. Photo courtesy Trans Mountain Corporation
Canadian crude in demand on the global market
Asian markets – particularly China, where refineries can process “substantial quantities” of extra heavy crude and bitumen – are now “opened in earnest” to Canadian oil, the International Energy Agency (IEA) said in its June Oil 2024 report.
“There’s demand for this crude and people are going to make deals,” said Kevin Birn, chief analyst of Canadian oil markets with S&P Global.
The IEA said Canadian crude will increasingly compete with heavy oil from other countries, particularly those in Latin America and the Middle East.
June’s loading of 20 vessels is slightly lower than the 22 vessels Trans Mountain had targeted, but Skolnick said a few bumps in the project’s ramp-up are to be expected.
“About three months ago, the shippers were telling investors on their calls, don’t expect it to be a smooth ramp up, it’s going to be a bit bumpy, but I think they’re expecting by Q4 you should start seeing everyone at peak rates,” Skolnick said.
Delivering higher prices
Trans Mountain’s expanded Westridge Terminal at Burnaby, B.C. now has capacity to load 34 so-called “Aframax” vessels each month.
One of the first deals, with Chinese refiner Rongsheng Petrochemical, indicates the Trans Mountain expansion is delivering on one of its expected benefits – higher prices for Canadian oil.
Canada’s Parliamentary Budget Office has said that an increase of US$5 per barrel for Canadian heavy oil over one year would add $6 billion to Canada’s economy.
The June deal between Rongsheng and an unnamed oil sands shipper saw a shipment of Access Western Blend (AWB) purchased for approximately US$6 per barrel below the Brent global oil benchmark. That implies an AWB selling price of approximately US$75 per barrel, or about US$10 more than the price received for AWB in Alberta.
Expanded export capacity at the Trans Mountain Westridge Terminal. Photo courtesy Trans Mountain Corporation
More pipeline capacity needed
Oil sands production – currently about 3.4 million barrels per day – is projected to rise to 3.8 million barrels per day by the end of the decade before declining slightly to about 3.6 million barrels per day in 2035, according to the latest outlook by S&P Global.
“Despite the recent completion of the Trans Mountain Expansion project, additional capacity will still be needed, likely via expansion or optimization of the existing pipeline system,” wrote Birn and S&P senior research analyst Celina Hwang in May.
“By 2026, we forecast the need for further export capacity to ensure that the system remains balanced on pipeline economics.”
Uncertainty over the federal government’s proposed oil and gas emissions cap “adds hesitation” to companies considering large-scale production growth, wrote Birn and Hwang.
Global oil demand rising
World oil demand, which according to the IEA reached a record 103 million barrels per day in 2023, is projected to continue rising despite increased investment in renewable and alternative energy.
A June outlook by the International Energy Forum (IEF) pegs 2030 oil demand at nearly 110 million barrels per day.
“More investment in new oil and gas supply is needed to meet growing demand and maintain energy market stability, which is the foundation of global economic and social well-being,” said IEF secretary Joseph McMonigle.
From Jason Nixon, MLA for Rimbey-Rocky Mountain House-Sundre and Alberta’s Minister of Seniors, Community and Social Services on X
Alberta’s government immediately took action to support those who lost their homes in the Jasper wildfire. We were on track to deliver 250 homes, but Alberta cannot do this without land. It’s been radio silence from Ottawa since Premier Danielle Smith sent a letter to the Prime Minister nearly a month ago. Read my full statement
From EnergyNow.ca
There has been a lot of talk about how Premier Danielle Smith did not sign a statement of support with the Government of Canada regarding a unified response to any tariff action taken by incoming President of the United States, Donald Trump.
Trudeau singles out Alberta premier for not putting ‘Canada first’ in break with other provinces
Thanks for reading William’s Substack! Subscribe for free to receive new posts and support my work.
While it is easy to throw stones at Premier Smith and call her actions one of selfishness, placing the interests of Alberta ahead of Canada, I think there are a number of reasons why one could reply that she was well within her right to act as she did. Over the last decade, Trudeau has gone out of his way to vilify the oil and gas industry, through his continual bad mouthing of the industry as being antiquated, and implementing policies that ensured that capital flight from the space accelerated, infrastructure projects were cancelled and massive levels of uncertainty were overlaid on the investment landscape going forward. Despite all this, the oil and gas sector still remains one of the most important economic contributors to the economy and is the largest component of exports from Canada to the United States, and it isn’t even close.
The Observatory of Economic Complexity (OEC)
The ironic thing of all this? To get oil to the refineries in the east, you need to IMPORT it by pipeline from the United States or primarily by ship to Quebec and New Brunswick. Had the Energy East Pipeline been built, Canadian refineries could have had Canadian domiciled product to satiate them. Moreover, had Northern Gateway been built, we would have diversified our client list beyond the United States. Sure, the Trans Mountain Pipeline was built, at extraordinary cost and timelines, and some “credit” is due to the Government getting it done, but the proof is in the current landscape that we operate in.
Now, coming back to the beginning. Why do I think Trudeau should look in the mirror before throwing rocks at Premier Smith? I come back to 2015 when Trudeau said Canada is the world’s “first postnational state” and that “there is no core identity, no mainstream in Canada.” He has gone about taking away what many of us grew up with, namely a sense of Canadian identity, and tried to replace that with shame and no collective identity. What is a post nation state you may ask? Post-nationalism or non-nationalism is the process or trend by which nation states and national identities lose their importance relative to cross-nation and self-organized or supranational and global entities as well as local entities.
So, is it any wonder that people are starting to question what is Canadian any more? At a time when Canada is under significant threat, the irony that Alberta likely represents the best tool in this tools (Trudeau) economic toolbox, is wildly ironic. As they say, karma’s a bitch.
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