News
22/10/24
Canada’s TMX to be full by 2028: Trans Mountain
Calgary, 22 October (Argus) — 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 Send comments and request
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