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Trans Mountain aims high, cites record volumes, producer support
Gary Park for Petroleum News
Those directing Canada’s Trans Mountain pipeline and the construction of an expansion to triple crude capacity on the system to 890,000 barrels per day have apparently decided that their best defense is offense.
In a rare public challenge to critics of the pipeline’s hopes, Ian Anderson, chief executive officer of Trans Mountain, owned since last year by the Canadian government, said earlier in September he “remains bullish” on the outlook for Trans Mountain, which is expected to complete its expansion work in 2023.
That optimism is based on the current performance of the existing line from the Alberta oil sands to a tanker terminal in the Greater Vancouver area.
In August, Canada’s main export link to markets beyond North America carried record volumes averaging 350,000 bpd (50,000 bpd above the nominal peak) and has operated at capacity during the COVID-19 period.
Anderson also noted that the expansion - better known as TMX - is now backed by long-term shipping commitments for 80% of the designed volume, bolstering his confidence that producers share his view of future oil demand.
“They remain just as bullish as they ever were,” he said. “Their commitments are not in question.”
He is not troubled by new forecasts, notably by BP’s assessment that fossil fuel consumption is on the verge of shrinking for the first time in modern history.
Under a business-as-usual case, BP forecasts that oil demand will plateau early this decade and slide by 10% by 2050. Other scenarios based on the assumption of global caps on greenhouse gas emissions are betting oil consumption will drop by 55% to 80% over the next 30 years.
Timeout order requested Another curve ball was aimed at TMX by a group of 100 Canadian economists and resource policy specialists, who sent an open letter to Prime Minister Justin Trudeau urging the federal government to order a timeout on the project and undertake an independent cost-benefit analysis to determine if the C$12.6 billion expansion remains financially viable and in the public interest.
They said such a move would allow the government to direct billions of dollars into “more reliable forms of stimulus and job creation.”
For now, Anderson refuses to cave in to that kind of pressure, arguing “we have decades ahead of us (for fossil fuel consumption). If we’re in a long-term trajectory toward less consumption then our producing community and the basin (in Western Canada) will be resilient in adapting to the future.”
Kenney sees supply crunch Amid the gloomy reports, Alberta Premier Jason Kenney insists that when global demand recovers from the pandemic in 2022, the world will face a “global supply crunch” stemming from the lack of investment in oil exploration and production.
Given the long-term reserves in the oil sands and improved efficiency levels, he predicted Alberta is poised to succeed “as long as we get pipelines built.”
Tim McMillan, president of the Canadian Association of Petroleum Producers, told the Calgary Herald that meeting global demand of 100 million bpd would require investment of US$600 billion a year.
“There are a lot of projections out there ... all of them show dramatic global investment for a long time in oil and gas,” he said.
Peter Tertzakian, executive director of Calgary-based ARC Energy Research Institute, said it’s a “bit early to make the call that we have reached peak oil,” although he did not reject the notion that peak oil demand is only about 10 years away.
He also raised a concern that projections by BP and others could hinder the industry’s ability to attract future investment.
Noting that pipelines such as TMX open the door for oil sands producers to diversify their markets beyond North America, he said Canada should aim to “maximize the revenue we get from our oil.”
To that end, Anderson insists TMX, which currently delivers to the three U.S. Pacific Coast states and some small global buyers in Asia, remains crucial infrastructure.
“We will provide flexibility into markets where shippers will be able to take advantage of where demand still exists. We’re confident that for decades to come we’re going to be in a good position,” he said.
Testing new markets, oil sands producer Cenovus Energy sent a tanker load from the Trans Mountain terminal in Vancouver through the Panama Canal to Irving Oil’s refinery in New Brunswick.
The company described the shipment covering 7,400 miles from June 18 to July 14 as a “one off” trial.
Cenovus said it was “pleased with the economics of this transaction” with Irving and would be open to working with another producer to “create significant value” for both companies.
- GARY PARK
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