By Nicole Jao
The recent expansion of Canada’s Trans Mountain (TMX) oil pipeline has not had a significant impact on crude costs at refineries on the U.S. West Coast, according to industry experts.
The expansion, which tripled pipeline capacity to 890,000 barrels per day, was expected to increase access to Canadian heavy crude oil for West Coast refiners and open up a new route to Asia.
However, in the first three months of operation, most of the TMX barrels have been exported to Asian markets, rather than being utilized by U.S. West Coast refiners as anticipated.
This unexpected trend has led to lower-than-expected earnings for refiners on the West Coast, who were counting on the access to lower-cost heavy barrels from Canada to boost their refining operations.
Analysts had predicted that the additional export capacity offered by TMX would narrow the price differential between Western Canada Select (WCS) and other crudes, but this has not materialized in the first three months of operation.
Despite this, refiners are hopeful that the influx of Canadian heavy barrels will eventually lead to a decrease in crude costs as they compete with other crudes, such as Alaskan North Slope (ANS), which are widely used by West Coast refiners.
While the impact of Canadian heavy crude on refining systems is still being evaluated, it is expected that over time, refiners will find the best blend of oils to maximize yield in their configurations.
Analysis:
The recent expansion of the Trans Mountain oil pipeline has not had the expected impact on U.S. West Coast crude prices. Despite predictions that the additional export capacity would narrow price differentials, most TMX barrels have been exported to Asia, leading to lower-than-expected earnings for West Coast refiners. However, there is optimism that the influx of Canadian heavy barrels will eventually lead to a decrease in crude costs as they compete with other crudes. Refiners are still testing the impact of Canadian heavy crude on their systems, but over time, they are expected to optimize their configurations to maximize yield.
