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.

CanadaEnergyGlobal MarketsOil and MineralsTMXTrans Mountain Pipeline

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