Canadian crude highly sought by Asian refiners and the region will "pick up the slack" if Californian demand wanes, Trans Mountain said today at the Argus Americas Crude Summit in Houston, Texas.
"We've been pleasantly surprised by the increase in demand, and it is primarily China and it is primarily petrochemical demand," Trans Mountain vice president of business development Jason Balasch said. "It's been kicking up lately."
California has also been a key destination for Canadian crude after Trans Mountain's 590,000 b/d expansion came online in May 2024, but aging refineries and stringent state regulations are prompting downstream operators to shutter facilities.
Chinese refiners meanwhile have taken a shine to Canadian crude, like Access Western Blend (AWB), which has both light and a heavy ends. The crude's ability to produce higher amounts of naphtha is especially of interest, as that is a key feedstock for the country's growing petrochemical industry.
The now 890,000 b/d dual pipeline system has given Albertan oil producers a meaningful alternative to shipping almost all of its crude to US refiners, while removing any doubts over how willing Asian refiners would be to take Aframax-sized cargoes from Vancouver, British Columbia.
"As we approached startup in late 2023, early 2024, it was viewed primarily as a California export play, but it's really becoming an Asian play," said Balasch.
The demand for space on Trans Mountain's system is evident in utilization that averaged above 90pc in the fourth quarter, according to Balasch. This is up from 87pc in the third quarter and, coupled with restrictions on Enbridge's 3.1mn b/d Mainline that delivers crude into the US, is another signal more space out of the Western Canadian Sedimentary Basin will be needed.
Further expansion of Trans Mountain system is being planned to help meet growing Asian demand. The federally-owned company is less than two years removed from bringing online its 590,000 b/d Trans Mountain Expansion (TMX) project, and this week applied to the regulator to increase capacity by 90,000 b/d using drag reducing agent (DRA).
The DRA project could be online as early as January 2027, according to the application.
Trans Mountain is considering another 210,000 b/d expansion after that, which could be brought online in either 2029 or 2030, Balasch said. That would bring total pipeline capacity up to about 1.19mn b/d, with another 35,000 b/d potentially flowing "seasonally".
Moving mountains
Even with optimization projects, a pipeline pinch is expected by many forecasters, including RBN president David Braziel, who said rising Canadian production may outpace egress as early as 2027 or 2028.
Politically, energy security is now top of mind, which has shone a bright light on the missteps by Canada's approach to oil and gas development over the past decade, Braziel said, but political will is not all that is required.
"Politics is politics," said Braziel. "It's really the economics of projects and the markets that are going to fundamentally decide what gets built."
Optimization projects by Trans Mountain and Enbridge are expected to give some relief, but yet another supply crunch may develop beyond 2030, raising the need for another pipeline altogether.
If Trans Mountain's two optimization projects are completed, the pipeline will be physically maxed out with no other low hanging fruit left to deliver large tranches of capacity. The Alberta government has long-called for more pipeline capacity and is planning to submit a proposal to the federal government by June.
Alberta premiere Danielle Smith said previously a 1mn b/d pipeline to British Columbia's north coast would be ideal and has made an arrangement with Canada's prime minister Mark Carney to pursue those plans, but that will be no small feat. Carney wants to further diversify trade away from a hostile US administration and energy is a key component of talks, making strides with other countries who have also been caught up in US president Donald Trump's trade wars.
