The Canadian oil sector is seeking to break free from the exploitation of US refineries by trying to open new markets for crude in Asia, with the support of Prime Minister Justin Trudeau.
Canadian oil companies are awaiting the opening of the Trans Mountain oil pipeline expansion during the first quarter of 2024, to launch into new markets in Asia and compete with the US market, according to Bloomberg.
The Canadian oil sector has been facing challenges from the weak capacity of the Trans Mountain pipeline for years, which has forced most producers to sell crude to US refineries at prices lower than their estimates, according to the specialized energy platform.
Line purchase 2018
Prime Minister Justin Trudeau’s government bought the line from Kinder Morgan in 2018 for C$4.5 billion ($3.3 billion).
(One Canadian dollar = $0.74).
From this deal, the government aimed to revive the Canadian oil sector by completing its expansion operations, to be able to transport 890 thousand barrels per day, at a rate of 3 times the previous capacity.
The implementation of the expansion project has faltered more than once since its purchase, which has led to a 5-fold increase in the cost of the expansion, due to the disruption of supply chains and the high prices of building materials and others.
The cost of the project rose to $30.9 billion compared to the initial stable estimate of $5.4 billion, according to the specialized energy platform.
Despite this, the Canadian government continued its expansion plan, which will reduce the dependence of Canadian oil sands producers on American refineries, which forces them to accept lower prices for their crude for years.
Asia awaits the opening
Canadian oil producers are eagerly awaiting the opening of the Trans Mountain line expansion, which will open up a variety of shipping options for crude to Asian markets and free them from the grip of the US market, which currently controls pricing due to weak competition opportunities.
Canadian Natural Resources said that the opening of this line after the expansion will allow the company to send barrels of oil to more foreign markets, which will represent a great opportunity for Canada, according to the company’s chief financial officer, Mark Stanthorpe.
Canadian Natural Resources, Canada’s largest oil producer, expects to increase its shipping capacity to 94,000 barrels per day with the opening and commissioning of the Trans Mountain pipeline expansion during the first quarter of 2024.
This amount alone is equivalent to 16% of the total available capacity on the line, and the company plans to send a large portion of it to Asian markets to create a competitive situation with American refineries, according to the specialized energy platform.
Companies are expanding
The expansion plan contributed to prompting Canadian oil companies to adopt parallel plans to increase oil sands production, to take advantage of the increased transportation capacity in the pipeline.
And Imperial Oil Limited, a subsidiary of the US Exxon Mobil Corporation, announced a plan to increase its production by 15,000 barrels per day.
The company has accelerated the Cold Lake expansion plan in Alberta, hoping to complete it ahead of schedule in 2023.
The company is currently studying the resumption of temporarily suspended expansion projects in the region with the start of operation of the Trans Mountain line, according to the specialized energy platform.
The line expansion project extends from Edmonton, Canada’s fifth largest city and capital of the province of Alberta, to charging stations near Vancouver in southwest British Columbia.
The pipeline expansion is expected to benefit other oil companies that did not previously use it, according to Crescent Point Energy CEO Craig Brixa.
Brixa expected that the Canadian oil sector would witness a major boom in the coming years, thanks to the expansion that the Canadian government took upon itself at great costs.
Although most Canadian oil companies are optimistic about the Trans Mountain line, Enbridge will not benefit from the expansion because it owns competing pipelines outside Alberta.
Solve the exit dilemma
The Canadian company Enbridge opened the third line for transporting crude oil outside the province of Alberta in 2021, and the company is currently negotiating with the beneficiaries of its lines about the future options that it will offer them after the opening of the Trans Mountain line expansion.
The company says it has plans to boost capacity and storage on the US Gulf Coast, but it cannot undertake the costly expansion of its routes as the government has done for Trans Mountain, according to CEO Greg Ebel.
On the other hand, the Canadian Oil Producers Association said that the expansion of the Trans Mountain line will solve the dilemma of Canadian oil exit to alternative markets and competition with the United States.
It will also allow producers to think of new ways to improve their production and market their products abroad more competitively than ever before, according to the association’s president, Lisa Patton.
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