It’s so close to being in service, yet so far — where Canadian oil producers are concerned.That’s because the on-again-off-again Trans Mountain pipeline expansion is off again as stockpiles of crude begin building up on this side of the border, sending Canadian oil prices into a tailspin.The government-owned corporation confirmed on Tuesday that its request to alter the specification for a roughly 2.3-kilometre section in the Fraser Valley between Hope and Chilliwack, BC.In a short, two-line statement the company said that the Canadian Energy Regulator (CER) had denied its variance request and that it is “awaiting the reasons for the decision.”.‘When’ is the $30 billion question .At a hearing on Nov. 27, company had expected to be given the green light to install a smaller diameter section of pipe — 30 inches as opposed to 36 inches — over a section of what it called “very challenging” hard rock drilling conditions.Trans Mountain argued that installing the smaller pipe would reduce construction time by about two months and allow it to meet its operating schedule starting in the first quarter of next year.Unlike a prior deviation order that was granted this fall around a ‘sacred tree’ on a native reserve near Kamloops, there was no formal opposition to the latest request and to date there have been no reasons given for the delay. The CER had promised an expedited decision with formal written reasons to follow.In its statement, Trans Mountain said the expansion is now more than 97.8% complete.That final 2.2% is proving to be the Longest Yard, especially for contracted oil producers that have been ramping up production in anticipation of filling the line before the end of the year. It takes about seven weeks to top off the additional 590,000 barrels per day that will eventually find its way to tidewater..When, is the $30-billion question. Some analysts are suggesting it may not happen until well into the third quarter of next year.With the peak winter drilling season almost here, they had been expected to drill roughly 8% more wells in 2024 to increase production by 350,000 barrels per day this year alone.Now those barrels are increasingly being tucked into bulging storage tanks or shipped south by rail. That in turn has widened the ‘differential’ — or discounts — for Canadian barrels vis-a-vis their American counterparts.That arbitrage is presently about USD$20 per barrel net of transportation to the Gulf of Mexico and has blown out as wide as $30 in recent weeks.Dollar figures aren’t immediately available but the potential losses could easily top hundreds of millions of dollars given that Canada exports more than 3 million barrels per day on pipelines.That’s why producers urged the CER to ensure the cost of any future delays will be borne entirely by Trans Mountain. And that’s notwithstanding the $20 billion overrun the company is seeking to recoup in the form of higher shipping tolls or pass the loss onto its federal government owners.Those hearings will begin in the New Year and run through until next October.
It’s so close to being in service, yet so far — where Canadian oil producers are concerned.That’s because the on-again-off-again Trans Mountain pipeline expansion is off again as stockpiles of crude begin building up on this side of the border, sending Canadian oil prices into a tailspin.The government-owned corporation confirmed on Tuesday that its request to alter the specification for a roughly 2.3-kilometre section in the Fraser Valley between Hope and Chilliwack, BC.In a short, two-line statement the company said that the Canadian Energy Regulator (CER) had denied its variance request and that it is “awaiting the reasons for the decision.”.‘When’ is the $30 billion question .At a hearing on Nov. 27, company had expected to be given the green light to install a smaller diameter section of pipe — 30 inches as opposed to 36 inches — over a section of what it called “very challenging” hard rock drilling conditions.Trans Mountain argued that installing the smaller pipe would reduce construction time by about two months and allow it to meet its operating schedule starting in the first quarter of next year.Unlike a prior deviation order that was granted this fall around a ‘sacred tree’ on a native reserve near Kamloops, there was no formal opposition to the latest request and to date there have been no reasons given for the delay. The CER had promised an expedited decision with formal written reasons to follow.In its statement, Trans Mountain said the expansion is now more than 97.8% complete.That final 2.2% is proving to be the Longest Yard, especially for contracted oil producers that have been ramping up production in anticipation of filling the line before the end of the year. It takes about seven weeks to top off the additional 590,000 barrels per day that will eventually find its way to tidewater..When, is the $30-billion question. Some analysts are suggesting it may not happen until well into the third quarter of next year.With the peak winter drilling season almost here, they had been expected to drill roughly 8% more wells in 2024 to increase production by 350,000 barrels per day this year alone.Now those barrels are increasingly being tucked into bulging storage tanks or shipped south by rail. That in turn has widened the ‘differential’ — or discounts — for Canadian barrels vis-a-vis their American counterparts.That arbitrage is presently about USD$20 per barrel net of transportation to the Gulf of Mexico and has blown out as wide as $30 in recent weeks.Dollar figures aren’t immediately available but the potential losses could easily top hundreds of millions of dollars given that Canada exports more than 3 million barrels per day on pipelines.That’s why producers urged the CER to ensure the cost of any future delays will be borne entirely by Trans Mountain. And that’s notwithstanding the $20 billion overrun the company is seeking to recoup in the form of higher shipping tolls or pass the loss onto its federal government owners.Those hearings will begin in the New Year and run through until next October.
