CALGARY, AB – One of the main challenges for the growing western Canadian oil industry—a recurring shortfall in export pipeline capacity and the oil price instability that comes with it—has been alleviated by major capacity additions, with another project that would provide more breathing room close to completion. However, a S&P Global Commodity Insights analysis finds that the situation may not last, and may experience tightness again in the future, depending on various factors.
The analysis by the S&P Global Oil Sands Dialogue finds that Western Canadian pipeline takeaway capacity should be adequate, with prices in the basin more predictable for the foreseeable future as a result.
Nevertheless, by the late 2020’s overall pipeline system utilization could exceed 90% on an annualized basis, leaving little cushion to adjust to any system upsets should they occur.
“At first glance, it appears that Canadian crude exports may avoid any major bottlenecks and transportation-driven price discounts over the next decade,” said Aaron Brady, vice president, energy oil market services, S&P Global Commodity Insights. “However, our analysis indicates western Canada may not be entirely out of the woods. The system appears it may run quite full later this decade, raising the risk of future regional price instability should upsets occur in the transportation system through to end-refineries.”
The Enbridge Line 3 Replacement Project (completed in 2021) and the soon-to-be-completed Trans Mountain Pipeline Expansion Project, along with potential expansions to existing systems could increase pipeline capacity by more than 1.2 million barrels per day by 2030. However, western Canadian crude production is expected to continue to grow through the decade and could exceed 5.3 million barrels per day (MMb/d) by 2030—growth of about 715,000 b/d compared to 2021.
In addition to supply growth, several other factors could result in a future where the unimpeded flow of Canadian crude oil exports may not be as secure as it currently appears:
“Straight-forward comparisons between expected export supply and pipeline capacity mask a more complex system,” said Kevin Birn, vice president, GHG estimation and coordination and chief analyst, Canadian oil markets, S&P Global Commodity Insights. “A prudent outlook should consider the real-life constraints and challenges that occur in a pipeline system as complex as that of western Canada, through which currently nearly 4 million barrels of crude oil—from ultra-light to extra-heavy are shipped often thousands of miles each day to dispersed refineries across the continent.”
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