Game changer: Trans Mountain pipeline expansion complete and starting to flow Canada’s oil to the world

From the Canadian Energy Centre

‘We’re going to be moving into a market where buyers are going to be competing to buy Canadian oil’

It is a game changer for Canada that will have ripple effects around the world.

The Trans Mountain pipeline expansion is now complete. And for the first time, global customers can access large volumes of Canadian oil, with the benefits flowing to Canada’s economy and Indigenous communities.

“We’re going to be moving into a market where buyers are going to be competing to buy Canadian oil,” BMO Capital Markets director Randy Ollenberger said recently, adding this is expected to result in a better price for Canadian oil relative to other global benchmarks.

The long-awaited expansion nearly triples capacity on the Trans Mountain system from Edmonton to the West Coast to approximately 890,000 barrels per day. Customers for the first shipments include refiners in China, California and India, according to media reports.

Shippers include all six members of the Pathways Alliance, a group of companies representing 95 per cent of oil sands production that together plan to reduce emissions from operations by 22 megatonnes by 2030 on the way to net zero by 2050.

The first tanker shipment from Trans Mountain’s expanded Westridge Marine Terminal is expected later in May.

Photo courtesy Trans Mountain Corporation

The new capacity on the Trans Mountain system comes as demand for Canadian oil from markets outside the United States is on the rise.

According to the Canada Energy Regulator, exports to destinations beyond the U.S. have averaged a record 267,000 barrels per day so far this year, up from about 130,000 barrels per day in 2020 and 33,000 barrels per day in 2017.

“Oil demand globally continues to go up,” said Phil Skolnick, New York-based oil market analyst with Eight Capital.

“Both India and China are looking to add millions of barrels a day of refining capacity through 2030.”

In India, refining demand will increase mainly for so-called medium and heavy oil like what is produced in Canada, he said.

“That’s where TMX is the opportunity for Canada, because that’s the route to get to India.”

Led by India and China, oil demand in the Asia-Pacific region is projected to increase from 36 million barrels per day in 2022 to 52 million barrels per day in 2050, according to the U.S. Energy Information Administration.

More oil coming from Canada will shake up markets for similar world oil streams including from Russia, Ecuador, and Iraq, according to analysts with Rystad Energy and Argus Media.

Expanded exports are expected to improve pricing for Canadian heavy oil, which “have been depressed for many years” in part due to pipeline shortages, according to TD Economics.

Photo courtesy Trans Mountain Corporation

In recent years, the price for oil benchmark Western Canadian Select (WCS) has hovered between $18-$20 lower than West Texas Intermediate (WTI) “to reflect these hurdles,” analyst Marc Ercolao wrote in March.

“That spread should narrow as a result of the Trans Mountain completion,” he wrote.

“Looking forward, WCS prices could conservatively close the spread by $3–4/barrel later this year, which will incentivize production and support industry profitability.”

Canada’s Parliamentary Budget Office has said that an increase of US$5 per barrel for Canadian heavy oil would add $6 billion to Canada’s economy over the course of one year.

The Trans Mountain Expansion will leave a lasting economic legacy, according to an impact assessment conducted by Ernst & Young in March 2023.

In addition to $4.9 billion in contracts with Indigenous businesses during construction, the project leaves behind more than $650 million in benefit agreements and $1.2 billion in skills training with Indigenous communities.

Ernst & Young found that between 2024 and 2043, the expanded Trans Mountain system will pay $3.7 billion in wages, generate $9.2 billion in GDP, and pay $2.8 billion in government taxes.

Related Topics:#CanadianEnergyCentre #TransMountainPipeline #WillGibson canadianoil feature

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Integrated Border Enforcement Team makes 189 kg cocaine bust at Coutts port of entry

Published on December 30, 2024

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News release from Alberta RCMP

Canada Border Services Agency (CBSA) officers, working with the Integrated Border Enforcement Team (IBET) in Alberta, a joint force operation between the RCMP Federal Policing Northwest Region, CBSA and Calgary Police Service, seized 189 kg of cocaine following a secondary examination of a commercial truck seeking entry at the Coutts port of entry on Nov. 13, 2024. The drugs have an approximate wholesale value of $2 million.

“The safety and security of Canadians is the RCMP Federal Policing Northwest Region’s top priority. With the support of various law enforcement agencies, we’ve successfully prevented harmful drugs from entering Canada and harming our communities.

Supt. Sean Boser, Officer in Charge of Federal Serious Organized Crime and Border Integrity – Alberta, RCMP Federal Policing Northwest Region

“I want to commend our CBSA officers who prevent illegal narcotics from breaching our borders and disrupt crime networks. In cooperation with our law enforcement partners, the RCMP and the Calgary Police Service, this significant seizure serves as another example of how Canada’s borders are being secured and drugs are kept off our streets.”

Ben Tame, Director, Southern Alberta and Southern Saskatchewan District, Canada Border Services Agency

“Our efforts to combat drug trafficking rely heavily on working closely with our partner law enforcement agencies, including the CBSA and RCMP. This is a significant seizure that undoubtedly had the potential to cause serious damage to our community.”

Supt. Jeff Bell, Criminal Operations & Intelligence Division, Calgary Police Service

IBET’s mandate is to enhance border integrity and security along the shared border, between designated ports of entry, by identifying, investigating and interdicting persons, organizations and goods that are involved in criminal activities.

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Alberta

Alberta government must do more to avoid red ink

Published on December 27, 2024

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From the Fraser Institute

By Tegan Hill

As Albertans look toward a new year, it’s worth reviewing the state of provincial finances. When delivering news last month of a projected $4.6 billion budget surplus for fiscal year 2024/25, the Smith government simultaneously warned Albertans that a budget deficit could be looming. Confused? A $4.6 billion budget surplus sounds like good news—but not when its on the back of historically high (and incredibly volatile) resource revenue.

In just the last 10 years, resource revenue, which includes oil and gas royalties, has ranged from a low of $3.4 billion in 2015/16 (inflation-adjusted) to a high of $26.1 billion in 2022/23. Inflation-adjusted resource revenue is projected to be relatively high in historical terms this fiscal year at $19.8 billion.

Resource revenue volatility is not in and of itself a problem. The problem is that provincial governments tend to increase spending when resource revenue is high, but do not similarly reduce spending when resource revenue declines.

Overall, in Alberta, a $1 increase in inflation-adjusted per-person resource revenue is associated with an estimated 56-cent increase in program spending the following fiscal year, but a decline in resource revenue is not similarly associated with a reduction in program spending. Over time, this pattern has contributed to historically high levels of government spending that exceed ongoing stable levels of government revenue.

And while the Smith government has shown some restraint, spending levels remain significantly higher than reliable ongoing levels of government revenue. Put simply, unpredictable resource revenue continues to help fund Alberta’s spending—and when resource revenues inevitably fall, Alberta is at high risk of plummeting into a deficit.

Indeed, Finance Minister Nate Horner continues to emphasize that we are “living in extremely volatile times” and warning that if oil prices fall below $70.00 per barrel a budget deficit is “very likely.” According to recent forecasts, the price of oil may hit $66.00 per barrel in 2025.

To avoid this fate, the Alberta government must do more to rein in spending. Fortunately, there’s plenty of options.

For example, the government spends billions in subsidies (a.k.a. corporate welfare) to select industries and businesses every year. A significant body of research shows these subsidies fail to generate widespread economic benefits. Eliminating this corporate welfare, which would generate significant savings in the budget, is a good place to start.

If the Smith government fails to rein in spending, and Alberta incurs a budget deficit, it will only mean more government debt on the backs of Albertans. And with Albertans already paying approximately $650 each in provincial government debt interest each year, that’s something Albertans simply can’t afford.

With a new year set to begin, the Smith government continues to warn of a budget deficit. But rather than simply prepare Albertans for more debt accumulation—financed by their tax dollars—the government should do more to avoid red ink. That means cutting wasteful government spending.