TMX crude pipeline likely to start 'later' in 1Q

The 590,000 b/d Trans Mountain Expansion (TMX) crude pipeline in western Canada will likely start commercial service "later" in the first quarter next year as it enters the final stages of the C$30.9bn ($22.8bn) project.

Shippers are at most seven months away from using the federally owned pipeline project, according to Trans Mountain last week in response to information requests from the Canada Energy Regulator (CER). The regulator is guiding both Trans Mountain and shippers toward a hearing, but first asking parties to elaborate on their positions relating to both line fill and tolls.

A specific in-service date still appears premature for the massive project that will connect oil producers in Alberta to an export terminal in British Columbia, but it is a sign of relative certainty for the pipeline that has been marred by construction and legal challenges, culminating in repeated delays and cost overruns since it was first proposed in 2013.

But as construction of the line and upgrades at terminals near completion, the operator is focusing on the commissioning process which involves making a call for physical crude to act as line fill, and working with the regulator to approve the tolls it will charge shippers.

A decision on tolls by the regulator at least 60 days in advance of the in-service date would be "sufficient" enough to avoid a delay in the pipeline's commissioning, according to Trans Mountain, but it indicated earlier in the fourth quarter as initially requested in June would be ideal.

Trans Mountain is still planning for the possibility of putting the expansion into commercial service in January, contingent on putting the final touches on construction, which means the expansion would need to have line fill completed in advance of the first round of monthly nominations which would be due on 13 December.

The line fill process would take about seven weeks, meaning nominating crude would need to occur by 15 September so Trans Mountain could take custody of the volumes starting in October.

The existing 300,000 b/d Trans Mountain line will assist with the wet commissioning of TMX by moving some volumes to expansion-related facilities, temporarily reducing throughputs on its own line.

Higher tolls reflect delays

Tolls filed were opposed by oil companies and refineries, prompting the regulator to request more information from Trans Mountain on the rising costs. Some construction costs ballooned fourfold since 2017 estimates, the regulator noted, which Trans Mountain attributed to multiple "start and stops" because of a lengthy provincial permitting process in British Columbia and the need for more consultation following the Federal Court of Appeal quashing the expansion in 2018.

Trans Mountain also indicated an "abundance" of resources was available for construction had TMX stayed on its initial schedule, but large projects in British Columbia like the Site C hydroelectric project and TC Energy's Coastal GasLink ramped up, making competition for labor fierce. Wildfires, flooding and multiplying land values were also among the contributing factors in over the past six years.

Trans Mountain said it will be responsible for 69pc of the C$23.5bn cost increase since 2017, with the remaining 31pc passed on to shippers in the form of higher tolls.

By Brett Holmes