THURSDAY, APRIL 4, 2024
The final expansion of the Canadian Trans Mountain oil pipeline is expected to be completed this month, according to a construction schedule filed by the corporation on Monday (April 1).
Reuters states that spread 5-B is the last segment that needs to be completed, and Trans Mountain's schedule filed to the Canada Energy Regulator estimates that construction and testing should wrap up this month.
Project Background
Owned by Canada Development Investment Corporation (CDEV)—also known as the Crown Corporation—the pipeline currently moves roughly 300,000 barrels of crude per day and stretches 1,150 kilometers (roughly 715 miles) from Edmonton, Alberta, to the West Coast of British Columbia in Burnaby.
There are 23 active pump stations between both locations. Trans Mountain reported that its pipeline consists of 827 kilometers of 24-inch pipe, 150 kilometers of 36-inch pipe and 170 kilometers of 30-inch pipe—although, where the system connects with the Trans Mountain Puget Sound Pipeline at the Sumas delivery point, the infrastructure is made up of 16 to 20 inch pipe and runs for 111 kilometers.
Trans Mountain to finish final segment of oil pipeline expansion in April, filing says https://t.co/bVCm3qEgIt pic.twitter.com/8L1SFvNjO8
— Reuters (@Reuters) April 2, 2024
In 2018, energy infrastructure company Kinder Morgan announced the suspension of all non-essential activities and related spending connected to the Trans Mountain pipeline expansion project. At the time, the 6.8 billion Canadian dollars ($5.09 billion) Trans Mountain Pipeline Expansion was still in progress and hadn’t reached Burnaby.
The decision reportedly stemmed from British Columbia’s resistance to the project, along with Kinder Morgan's unwillingness to saddle shareholders with the additional risk that comes with construction costs ramping up from $200 million to $300 million a month.
At the time, former Alberta Premier Rachel Notley indicated that her government was open to buying the pipeline to ensure the project was completed. Previously, Kinder announced delays in obtaining permits for the project in 2017.
By June 2018, the Canadian government followed through on its interest in purchasing the pipeline and bought the infrastructure from Kinder Morgan for $3.47 billion, a deal that Prime Minister Justin Trudeau hoped would expedite the project’s completion.
The following year, Trudeau announced that the pipeline project had been approved once more, emphasizing that money made from the pipeline would be reinvested into green energy endeavors. The expansion is also a move to reduce dependency on selling petroleum to the States, as the pipeline will move product to the Pacific for delivery to Asia.
In June 2020, Trans Mountain issued a statement announcing that it had experienced a spill at its Sumas Pump Station in Abbotsford, British Columbia, near Native American reservation the Sumas First Nation.
According to the company’s initial estimates, the pipeline lost between 940 and 1,195 barrels (150,000 to 190,000 liters) of light crude. Sumas First Nation Chief Dalton Silver reported that it was the fourth spill the reservation had endured in 15 years.
Both Trans Mountain and the federal Transportation Safety Board were investigating what caused the spill.
Finally, at the beginning of this year, the Canadian Federal Government reportedly issued a taxpayer-backed loan guarantee for up to $2 billion for the completion of the currently over-budget Trans Mountain pipeline.
According to a report from Canada’s National Observer, the pipeline was about 97% complete, though the final 16 kilometers (almost 10 miles) have held construction challenges, including recent concerns over the integrity of the pipeline’s coating.
In a news release from the Canada Energy Regulator, it was stated that the concerns outweighed any potential benefits for a faster completion of the Trans Mountain Expansion Project.
The Commission found that the drawbacks outweighed Trans Mountain’s stated benefits. Specifically, it had concerns, including:
On Dec.14, 2023, Trans Mountain filed a new variance application for the same pipeline section. Trans Mountain reportedly asked the regulator to reverse its decision, claiming that failing to do so could delay the project by about two years and cause the Crown corporation to “suffer billions of dollars in losses.”
A hearing was held Jan. 12 on Trans Mountain’s request, leading to CER reportedly stating that it would allow the Crown Corporation to use 30-inch diameter pipes instead of 36-inch diameter pipes.
However, the Crown Corporation had reportedly stated that there will be more delays unless the Canada Energy Regulator allowed it to use smaller pipes for a stretch of challenging construction conditions between Hope and Chilliwack, British Columbia.
Additionally, Trans Mountain underwent a $1-billion loss in its third-quarter financial statement, stating that the reason was that interest rates on its billions of dollars of loans rose from 1.85% to the Canadian prime rate of 6.6%.
Other factors had reportedly included the timing and cost to finish the project, the toll structure and what would happen when the initial contracts with oil shippers expire.
Latest Updates
Last month, Trans Mountain had reportedly begun filling its pipeline expansion with oil in a staged process.
"We feel good about progress," Chief Financial Officer Mark Maki told Reuters. "We've got some key technical things that are coming up here in the coming week or two. And once those are done, I think it should be relatively smooth sailing."
According to Maki, one of the technical challenges involves stringing pipeline through hard rock in the final segment, which is why it had previously requested to use a smaller-diameter pipe.
The pipeline will reportedly be highly utilized as early as next year and run full sometime in 2025 or 2026. Additionally, the Canadian government stated that it planned to sell the pipeline, though Maki said a sale this year is unlikely.
Along with completing construction, Trans Mountain was reported to be in a dispute with shippers over tolls anticipated to be charged, a situation that the regulator expects to resolve in early 2025.
According to the report, Suncor Energy has sold one of the first cargoes to be shipped through the expansion to China's Sinochem Group. Sinochem and Suncor did not immediately respond to requests for comment. Maki declined to comment.
According to CBC News, Maki also spoke about the pipeline’s past at the CERAWeek energy conference in Houston last month, commenting on the history of the project.
"I reflect on some lyrics from a Grateful Dead song: 'What a long, strange trip it's been.' Twelve years from beginning to in-service. That's too long," he said, before listing the many challenges such as the regulatory process, the pandemic, floods and wildfires.
Maki also suggested that there should be a post-construction cost review to see what can be learned about developing large-scale projects in Canada.
"It is expensive to do the project right. That's what it costs to build infrastructure," he said, in an interview with CBC. "For all those reasons, we have to understand better, whoever you are, what it really is going to cost to build infrastructure."
He added that the final price tag could still change as work is completed. The company expects that it will need about three months after the completion of construction before it can provide a definitive cost estimate.
Additionally, it was reported that Sinochem Group had purchased one of the first crude cargoes to move through the new pipeline.
Reuters states in its latest report that the pipeline is scheduled to be in service in the second quarter and is expected to raise Canadian crude oil prices just as producers boost production.
Specifically, the Canadian government-owned $34-billion Canadian dollar ($25.07 billion) pipeline expansion is expected to almost triple the flow of crude from Alberta to Canada's Pacific Coast to 890,000 barrels per day.
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