Why Canada’s oil exports may flow stronger over the next decade

Standard & Poor’s predicts that by late 2020, total oil pipeline system utilization could reach 90 percent year-on-year. Photograph: Todd Korroll/Reuters

Canadian oil producers may avoid bottlenecks in major export pipelines over the next decade as upcoming projects ease a long-standing challenge to the industry, according to a new analysis. However, S&P Global Commodity Insights warns that “western Canada may not be completely out of the woods.”

Alberta’s oil sands are the fourth largest reserves in the world, and the most important source outside the OPEC bloc. For years, a lack of export pipeline capacity has led to significant price cuts for Canadian barrels versus the global market. At the same time, regulatory delays and environmental opposition to pipeline projects have dampened investor confidence in the exploration and production sector in western Canada.

S&P Global Commodity Insights now estimates that the Trans Mountain pipeline expansion, in addition to capacity expansions to existing lines, will add 900,000 barrels per day (b/y) of pipeline capacity this decade, in addition to the recently completed third line expansion project. Meanwhile, supply is expected to increase by 715,000 b/d by 2030.

This forecast assumes that there will be no further delays in the 590,000 boe/d TMX project, which is expected to be completed by the end of 2023.

“At first glance, it appears that Canadian crude exports may avoid any major bottlenecks and transportation-driven price discounts over the next decade,” Aaron Brady, vice president of energy oil market services at S&P Global Commodity Insights, said Tuesday. New release.

“Western Canada may not be completely out of the woods,” he added. “It appears that the system may be operating at full capacity later this decade, raising the risk of regional price instability in the future in the event of disruptions in the transmission system up to final refineries.”

Standard & Poor’s predicts that by late 2020, overall pipeline system utilization could reach 90 percent year-over-year, leaving little support for coping with any disruptions to the system.

Kevin Byrne, chief Canadian oil markets analyst at Standard & Poor’s, warns that direct comparisons of export supply and pipeline capacity mask a more complex reality.

For example, S&P analysis indicates that the pipeline’s “name plate” capacity is not the same as its effective capacity, due to seasonal and maintenance trends. Moreover, the capacity can decrease over time. He also warns of the risks of the energy transition, given Canada’s reliance on selling to US refineries.

“A prudent view should take into account the real-world limitations and challenges of a pipeline system as complex as those in Western Canada, through which approximately four million barrels of crude oil are currently shipped, from very light to very heavy. Thousands of miles a day to disperse refineries across the continent.”

Jeff Lagerquist is a Senior Reporter at Yahoo Finance Canada. Follow him on Twitter Tweet embed.

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