Energy Insights: Canada’s Trans Mountain Pipeline Expansion
By Andre-Philippe Hardy, Greg Pardy and Robert Kwan
Published August 15, 2023 | 13 min listen
In this episode of the Industries in Motion podcast, Greg Pardy, Managing Director and Head of Global Energy Research, Robert Kwan, Managing Director and Canadian Energy Infrastructure Analyst, and Andre-Philippe Hardy, Head of Canadian & Asia-Pacific Research at RBC Capital Markets, discuss the Canadian government’s Trans Mountain Pipeline Expansion (TMX), which is slated to be in service during the first quarter of 2024. We expect this pipeline expansion to transform Canada’s oil egress and give oil sands producers in Canada greater export access to global markets, including Asia.
Disclosures and Disclaimers
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The Trans Mountain pipeline is the only major Canadian pipeline transporting oil to the West Coast, running from Edmonton, Alberta to Burnaby, BC. As a made-in-Canada solution, the 590,000 bbl/d expansion of Trans Mountain will almost triple its nominal capacity to 890,000 bbl/d. This expansion will give oil producers in Canada more optionality to diversify their oil exports globally, including Asia but especially into California. Importantly, with TMX online, Canada appears poised to see excess export pipeline capacity that we peg at 200,000-300,000 bbl/d, which is good news for oil prices in Western Canada. In our view, TMX should yield structurally tighter location spreads between Western Canada Select (WCS) and WTI prices until excess pipeline capacity gets filled, which we believe could occur in 2026. To be sure, WCS-WTI spreads compare a heavy sour barrel with a light sweet one, thus light-heavy spreads—impacted by OPEC+ policy decisions—remain a key driver.
Ultimately, we expect an Indigenous-led consortium to acquire the project. Due to the likely size of the transaction, we believe the number of strategic parties that could be involved will be very limited, with only Pembina in our Canadian midstream coverage universe publicly expressing an interest via its Chinook Pathways partnership with the Western Indigenous Pipeline Group. We also see the potential for interest from financial players, whether in a partnership with Indigenous communities and/or joining an existing consortium such as Chinook Pathways.
André-Philippe Hardy
Head of Canadian and Asia-Pacific Research, RBC Capital Markets
André-Philippe Hardy is Head of Canadian & APAC Research at RBC Capital Markets, a premier investment bank that provides a focused set of products and services to corporations, institutional investors and governments around the world. RBC Capital Markets’ Canadian equity research team is consistently top-ranked by institutional investors, as per the Brendan Wood International, Greenwich and Institutional Investor surveys. Prior to becoming Head of Canadian Research in November 2013 (he was appointed Head of APAC Research in November 2019), André led RBC Capital Markets’ Canadian financial services Equity Research team for six years, with direct coverage of banks and insurance companies. Throughout his career as an equity analyst, Andre was ranked consistently as a top analyst in his sectors in industry surveys, while his stock-picking success was validated by his StarMine rankings and his work was often quoted in the financial press. His primers on banking and insurance were unique products, which were widely read by investors as well as management teams. Andre joined RBC Capital Markets in 2007 after almost a decade in the equity research departments of Merrill Lynch Canada and TD Securities.
Greg Pardy
Managing Director and Head of Global Energy Research
As Head of Global Energy Research, Greg is responsible for leading a team of more than 30 professionals in Canada, the United States, Europe, and Australia who cover E&Pand Integrated oil companies, Oilfield Services, as well as Energy Infrastructure, MLPs, and Power &Utilities companies. He is also directly responsible for the coverage of Canada's Senior E&P and Integrated Oil companies. Prior to joining RBC Capital Markets in 2009, Greg was the Director of Equity Research at Scotia Capital for two years. Prior to this, he provided research coverage of the Canadian energy sector for 15 years at Scotia Capital and Goldman Sachs in New York. He was the top-ranked Analyst covering the Canadian Integrated & Refining sector in 2022 as per independent investor surveys. Greg is a Managing Director at RBC Capital Markets.
Robert Kwan
Managing Director and Canadian Energy Infrastructure Analyst
Robert is an energy infrastructure analyst, primarily covering Canadian pipeline, power, and utility companies. He assumed lead coverage of this sector in early 2007, after covering power income trusts for three years. Robert joined RBC Capital Markets in 1998 in investment banking and joined the energy infrastructure research team in 2003. He is the lead analyst for the pipelines, power, and utilities team, which has been consistently top-ranked in the Greenwich and Brendan Wood surveys. Robert is a Managing Director of RBC Capital Markets.
CanadaEnergyGlobal MarketsOil and MineralsTMXTrans Mountain Pipeline
