The Trans Mountain oil pipeline in Canada has changed the export market for Canadian crude

Impact on Canada’s Oil Market

1. Narrowed WCS-WTI Differential:
   • TMX has reduced the discount on Western Canadian Select (WCS) relative to West Texas Intermediate (WTI) from $15-20/barrel pre-2024 to $10-12/barrel in 2024, with further tightening in 2025. This reflects improved market access, boosting Canadian oil revenues by an estimated C$10 billion in 2024, equivalent to an “extra month” of production.
   • Mechanism: Increased export capacity to Pacific markets reduces bottlenecks at Alberta’s Hardisty hub, allowing Canadian heavy crude to compete globally, particularly in Asia’s heavy oil refineries.
2. Boosted Production:
   • TMX has enabled Canadian crude production to rise from 5.2 million bpd in 2023 to 5.4 million bpd in December 2024, with projections of 5.6 million bpd by December 2025 and potentially 6 million bpd by 2030. Major producers like Canadian Natural Resources and Cenovus Energy, controlling 80% of TMX’s 710,000 bpd contracted capacity, are driving this growth.
   • Context: This aligns with the U.S. drilling slowdown (576 rigs in May 2025), as Canada fills supply gaps left by declining U.S. shale output.
3. Shift from Rail and Enbridge:
   • TMX has reduced reliance on costly rail transport (previously $17/barrel vs. $9-10/barrel for pipelines). U.S. rail imports of Canadian crude fell to 55,000 bpd in May 2024, a four-year low. Enbridge’s Mainline system, Canada’s primary export route, saw flows drop by up to 300,000 bpd as producers shifted to TMX for better pricing and Pacific access.
4. High Tolls and Utilization Issues:
   • Construction costs soared to C$34 billion, leading to tolls nearly double the 2017 estimates for contracted shippers. The 20% spot capacity (178,000 bpd) is underused due to high spot tolls, with utilization at 77% in 2024 (vs. 83% forecast) and projected at 84% in 2025. This has cut 2025 revenue forecasts from C$3.0 billion to C$2.7 billion.
   • Disputes: Shippers, facing 30% of cost overruns, are challenging tolls with the Canada Energy Regulator (CER).
5. Enhanced Market Flexibility:
   • TMX allows producers to target higher-value markets. For example, Imperial Oil balances Midwest/Gulf Coast shipments with Pacific exports, while Cenovus leverages TMX for global reach. However, Vancouver’s Westridge Marine Terminal is constrained to 15-20 Aframax tankers monthly (550,000 barrels each) due to port logistics, limiting throughput.

1. Diversification to Asia:
   • Pre-TMX, the U.S. absorbed 90-98% of Canada’s 4.2 million bpd crude exports. TMX has increased non-U.S. exports to 6.5% by late 2024, with 50% of TMX shipments (235,000 bpd from June-September 2024) going to Asia, notably China, South Korea, Japan, India, and Brunei.
   • China: Rongsheng Petrochemical has become a key buyer for its 800,000 bpd Zhejiang refinery, favoring Canadian heavy crude as a cheaper, non-sanctioned alternative to Russian or Middle Eastern oil.
   • India: Reliance Industries purchased 2 million barrels for July 2024 delivery, its first TMX cargo, signaling growing interest.
   • U.S. West Coast: 40% of TMX crude supplies refineries like BP Cherry Point and HF Sinclair Puget Sound, displacing Alaskan and Latin American crude.
2. Decline in U.S. Gulf Coast Re-Exports:
   • TMX’s direct Pacific route has reduced Canada’s reliance on U.S. Gulf Coast re-exports to Asia (previously 150,000-200,000 bpd). Gulf Coast sales dropped 1.6 million barrels in late 2024, as Canadian oil now ships from Vancouver, lowering costs and boosting producer margins.
3. Geopolitical Leverage:
   • TMX strengthens Canada’s position amid U.S. tariff threats. Proposed 10-25% tariffs on Canadian oil, paused for 30 days in February 2025, could drive more TMX utilization to avoid tariffs by targeting Asia. CEO Mark Maki noted tariffs could maximize Westridge dock usage.
   • Context: This aligns with Iran’s potential oil export surge (0.8-1.3 million bpd) if sanctions are lifted, which could lower global prices to $55-60/barrel, making TMX’s Asian diversification critical for Canada’s competitiveness.
4. Challenges in Asia:
   • Cheap Russian crude, flooding Asia post-Ukraine sanctions, has capped TMX’s market share. Canadian heavy crude competes with discounted Russian Urals, though Canada’s stability and non-sanctioned status appeal to buyers.
   • Port constraints (e.g., narrow channels, daylight-only transits) limit Vancouver to 15-17 Aframaxes monthly, below the 34-vessel capacity, restricting Asian export growth.

• Iran Nuclear Deal: A deal could flood the market with Iranian oil, lowering prices and pressuring WCS margins. TMX’s role in narrowing WCS-WTI discounts and accessing Asia mitigates this risk, unlike U.S. producers facing break-even challenges at $61/barrel.
• U.S. Drilling Slowdown: TMX’s boost to Canadian output contrasts with U.S. rig declines, positioning Canada to capture market share, particularly on the U.S. West Coast.
• Singapore’s LNG Market: Lower oil prices from Iranian supply could reduce LNG costs for Singapore, while TMX’s oil exports to Asia stabilize regional energy markets, indirectly supporting Singapore’s energy security.
• Folk Yanbu: TMX’s displacement of Middle Eastern heavy crude could reduce Saudi export volumes, affecting Red Sea trade routes served by vessels like the Folk Yanbu.

• Economic Gains: TMX has added C$10 billion to Canada’s oil revenues in 2024, but high tolls and a potential C$14 billion federal loss on the pipeline’s sale raise financial concerns.
• Environmental and Social Issues: Opposition from First Nations and environmentalists persists due to spill risks and a seven-fold increase in Burrard Inlet tanker traffic, with TMX emitting 400,000 tonnes of CO2 annually (excluding downstream emissions).
• Future Outlook: TMX’s spare capacity may be fully utilized by 2027-2028, with debottlenecking plans to reach 1.13 million bpd. New pipelines face regulatory and environmental barriers, making TMX critical for future growth.

• Data Gaps: Precise 2025 export splits (e.g., China vs. India) are unavailable, and CER data for Q1 2025 is pending. Utilization projections (84% in 2025, 96% by 2028) may vary with tariffs or oil prices.
• Verification: Check CER reports, Kpler tanker tracking, or company filings (e.g., Cenovus, Imperial) for detailed export data. X posts highlight TMX’s revenue boost but lack specifics.
• Critical View: TMX’s economic benefits are tempered by environmental costs and reliance on heavy crude, which faces long-term demand risks as global oil use may peak by 2030.