The Canadian oil sector seeks to free itself from the exploitation of American refineries by trying to open new markets for crude oil in Asia with the support of Prime Minister Justin Trudeau.

Canadian oil companies are awaiting the opening of the Trans Mountain pipeline expansion in the first quarter of 2024 to move towards new markets in Asia and compete with the American market, according to Bloomberg.

The Canadian oil sector has faced challenges of weak Trans Mountain pipeline capacity for years, which has forced most producers to sell crude to American refineries at prices lower than their estimates, according to the specialized energy platform.

Line Purchase 2018

The government of Prime Minister Justin Trudeau purchased this line from Kinder Morgan in 2018 for 4.5 billion Canadian dollars (3.3 billion dollars).

(Canadian dollar = 0.74 U.S. dollars).

The government aimed with this deal to revive the Canadian oil sector by completing its expansion operations, to be able to transport 890,000 barrels per day, at a rate three times the previous capacity.

The implementation of the expansion project stumbled more than once since its purchase, leading to a fivefold increase in the expansion cost due to supply chain disruptions, rising building material prices, and others.

The project cost rose to 30.9 billion dollars compared to the initial estimate stable around 5.4 billion dollars, according to the specialized energy platform.

Despite this, the Canadian government continued with the expansion plan which will reduce Canadian oil sands producers' dependence on American refineries that have forced them to accept discounted prices for their crude for years.

Asia Awaits Opening

Canadian oil producers eagerly await the opening of the Trans Mountain pipeline expansion, which will open diversified shipping options for crude to Asian markets, freeing them from the grip of the American market controlling pricing currently due to weak competition opportunities.

Canadian Natural Resources stated that the opening of this line after expansion will enable the company to send barrels of oil to more foreign markets, representing a great opportunity for Canada, according to the company's Chief Financial Officer Mark Stanthorp.

Canadian Natural Resources, the largest oil producer in Canada, expects to increase its shipping capacity to 94,000 barrels per day with the opening and operation of the Trans Mountain expansion in the first quarter of 2024.

This quantity alone equals 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 Expand

The expansion plan contributed to pushing Canadian oil companies to adopt parallel plans to increase oil sands production to benefit from the increased transport capacity in the pipeline.

Imperial Oil Limited, affiliated with the American ExxonMobil, announced a plan to increase its production by 15,000 barrels per day.

The company accelerated procedures to expand Cold Lake facilities in Alberta, hoping to complete it before the scheduled date during 2023.

The company is currently studying the resumption of temporarily halted expansion projects in the area with the start of the Trans Mountain line operation, according to the specialized energy platform.

The expansion project extends from Edmonton, the fifth largest Canadian city and the capital of Alberta, to shipping stations near Vancouver southwest of British Columbia state.

Other oil companies that previously did not use the pipeline are expected to benefit from the line expansion, according to Crescent Point Energy CEO Craig Bryksa.

Bryksa expected the Canadian oil sector to witness a major revival during the coming years thanks to the expansion that the Canadian government undertook at great costs.

Despite most Canadian oil companies’ optimism about the Trans Mountain line, Enbridge will not benefit from the expansion as it owns competing pipelines outside Alberta.

Solving the Exit Dilemma

Enbridge Canadian company opened the third crude oil transport pipeline outside Alberta in 2021 and is currently negotiating with its line beneficiaries about the future options it will provide them after the opening of the Trans Mountain expansion.

The company says it has plans to enhance capacity and storage on the U.S. Gulf Coast but cannot afford costly expansions of its lines as the government did in the Trans Mountain line, according to CEO Greg Ebel.

On the other hand, the Canadian Association of Petroleum Producers said the Trans Mountain expansion will solve the dilemma of Canadian oil exiting to alternative markets and competing 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, according to the association president Lisa Baton.

Source: Energy Website