The new capacity on the Trans Mountain system comes as demand for Canadian oil from markets outside the United States is on the rise. According to the Canada Energy Regulator, exports to destinations beyond the U.S. have averaged a record 267,000 barrels per day so far this year, up from about 130,000 barrels per day in 2020 and 33,000 barrels per day in 2017. “Oil demand globally continues to go up,” said Phil Skolnick, New York-based oil market analyst with Eight Capital.
In recent years, the price for oil benchmark Western Canadian Select (WCS) has hovered between $18-$20 lower than West Texas Intermediate (WTI) “to reflect these hurdles,” analyst Marc Ercolao wrote in March. “That spread should narrow as a result of the Trans Mountain completion,” he wrote. “Looking forward, WCS prices could conservatively close the spread by $3–4/barrel later this year, which will incentivize pro- duction and support industry profitability.” Canada’s Parliamentary Budget Office has said that an increase of US$5 per barrel for Canadian heavy oil would add $6 billion to Canada’s economy over the course of one year. The Trans Mountain Expansion will leave a lasting economic legacy, according to an impact assessment conducted by Ernst & Young in March 2023. In addition to $4.9 billion in contracts with Indige- nous businesses during construction, the project leaves behind more than $650 million in benefit agreements and $1.2 billion in skills training with In- digenous communities.
“Both India and China are looking to add millions of barrels a day of refining capacity through 2030.”
In India, refining demand will increase main- ly for so-called medium and heavy oil like what is produced in Canada, he said. “That’s where TMX is the opportunity for Canada, because that’s the route to get to India.” Led by India and China, oil demand in the Asia-Pacific region is projected to increase from 36 million barrels per day in 2022 to 52 million barrels per day in 2050, according to the U.S. Energy Information Administration. More oil coming from Canada will shake up markets for similar world oil streams including from Russia, Ecuador, and Iraq, according to analysts with Rystad Energy and Argus Media. Expanded exports are expected to improve pricing for Canadian heavy oil, which “have been depressed for many years” in part due to pipeline shortages, according to TD Economics.
In recent years, the price for oil benchmark West ern Canadian Select (WCS) has hovered between $18-
Photo courtesy Trans Mountain Corporation
28 SPOTLIGHT MAGAZINE ON BUSINESS MAGAZINE • VOL 24 ISSUE 3
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