Trans Mountain expansion may not be economically viable, says think tank report

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Trans Mountain expansion may not be economically viable, says think tank report
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The way forward for the Trans Mountain pipeline enlargement undertaking is as soon as once more being known as into query — this time by a brand new report that argues the combo of competing pipelines, adjustments in vitality demand and shifts in worldwide costs might wreak havoc on the undertaking’s enterprise case.

The Canadian Centre for Coverage Alternate options, a left-leaning think-tank, warns in an evaluation launched this morning that the federal authorities could must rethink its dedication to increasing the pipeline.

The report, titled Reassessment of Want for the Trans Mountain Pipeline Enlargement Undertaking, says the COVID-19 pandemic has brought on a short-term drop in oil demand. The impression of COVID-19 on demand additionally has been famous by the Worldwide Power Company, which revised its personal outlook.

The report concludes optimizations and expansions of 5 current pipelines, plus the completion of the Line three undertaking in 2021, will depart Canada with sufficient pipeline capability by way of to 2040 with out the Trans Mountain enlargement and Keystone XL.

“The present (Trans Mountain) pipeline is by no means a waste,” mentioned Hughes, a geologist who works within the discipline of oil and fuel. “However what we’re speaking about is tripling the capability to make some huge cash in Asia. And you actually have to take a look at the information.”

After buying the Trans Mountain Pipeline and plans for its enlargement, the federal government has touted its advantages to taxpayers. Figures from the federal authorities point out that greater than 2,000 employees have been employed and the undertaking is anticipated to make use of 5,500 folks throughout peak development.

Earlier than its completion and over the subsequent 20 years, the pipeline is anticipated to generate $46 billion for the federal government and $73 billion for producers.

WATCH: Former Finance Minster Invoice Morneau defends the pipeline’s enlargement

Finance Minister Invoice Morneau assures Canadians that regardless of price overruns the Transmountain Enlargement pipeline undertaking continues to be a going concern. 0:36

Profitable international markets?

One of many foremost arguments for the Trans Mountain enlargement has all the time been the necessity to get extra western oil to tidewater so it could actually discover new markets outdoors of the U.S.. Earlier than the pandemic, the Alberta authorities mentioned that — with out the Trans Mountain enlargement — Canada would proceed to promote its oil overseas at a steep low cost, costing the Canadian economic system $16 billion a yr.

The federal authorities says no less than 500,000 barrels a day can be obtainable for export to international markets as soon as the enlargement is full.

However the brand new report casts doubt on that argument. Canadian producers might be worse off, it says, as a result of Asian markets have been paying much less for heavy/bitter oil, which is similar to Western Canadian crude. Relying on market circumstances and better transportation prices, the report notes, producers might lose $Four to $6 per barrel.

Trans Mountain enlargement nonetheless provides Canada leverage

However one group that promotes the sustainable use of petroleum assets nonetheless sees worth in increasing Trans Mountain. Richard Masson, chair of the World Petroleum Council, mentioned Thursday afternoon that Canada has no assure that the pipelines the report mentions — together with Keystone XL — will ever see the sunshine of day.

The Trans Mountain enlargement, Masson mentioned, provides Canada extra leverage available in the market.

“Going to Asia, sure, you’ll most likely find yourself getting much less cash than if you may get to the U.S.,” Masson mentioned. “However the truth that you could have the choice helps be certain U.S. refiners are going to pay you full worth.

“When you do not have an possibility, you might be on the mercy of your prospects.”

Masson acknowledges the pipeline’s rising prices as a result of delays and courtroom motion means its returns can be decrease than initially promised, however that hasn’t modified the business’s curiosity within the Trans Mountain enlargement.

Trans Mountain acknowledged in June that shippers have already signed contracts for the brand new pipeline and it has commitments for roughly 80 per cent of its capability.

The Canadian Affiliation of Petroleum Producers additionally cited the alternatives to entry new markets in a press release Thursday.

“With comparatively brief transportation routes to essential rising markets for heavy oil in China and India in comparison with different producers and a secure provide of responsibly produced assets, Canada has a definite benefit to seize and develop our share of the worldwide market,” mentioned Jay Averill, CAPP’s media relations supervisor.

The twinning of the 1,150 kilometre-long Trans Mountain pipeline will practically triple its capability to an estimated 890,000 barrels a day and enhance site visitors off B.C.’s coast from roughly 5 tankers to 34 tankers a month. (CBC Information)

When it is completed, the Trans Mountain enlargement undertaking will twin the prevailing Alberta-to-British Columbia line and enhance the pipeline’s capability from about 300,000 to 890,000 barrels per day.

In February, Trans Mountain estimated the price of the enlargement at $12.6 billion, with service anticipated to start out on the finish of 2022. That is along with the $4.5 billion the federal government spent to buy it from Kinder Morgan. The expanded pipeline will instantly produce 400,000 tonnes of greenhouse fuel emissions yearly, which has been factored into Canada’s emission targets.

Though it is tough to account for oblique emissions, Surroundings and Local weather Change Canada estimates the upstream emissions add 21 and 26 megatonnes of carbon dioxide per yr, primarily based on 2015 calculations. These numbers do not account for land use adjustments and electrical energy or different fuels used elsewhere.

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