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Trans Mountain races to the finish line as two other pipeline projects near completion

The 590,000-barrel-per-day Trans Mountain Expansion project that will be 30 per cent complete by the end of this year.

CALGARY — Despite the drop in global oil demand and declines in upstream energy investment, the head of the company developing the Trans Mountain expansion expects the pipeline to be full of oil when construction wraps up in 2022. But he acknowledged the pipeline may find itself competing for shipper attention from two other pipeline projects that are also under way.

“We remain bullish on the future. We think demand will stay there. The expansion was not predicated on significant new oilsands investment,” Trans Mountain Corp. president and CEO Ian Anderson said in an interview Tuesday, marking the one-year mark of construction re-starting on the $12.6-billion expansion.

Anderson said the existing Trans Mountain pipeline, which runs from Alberta to Burnaby, B.C., has been running full because there’s demand in the Pacific Basin for heavy oil and which would support the 590,000-barrel-per-day Trans Mountain Expansion project that will be 30 per cent complete by the end of this year.

“During this COVID period, we’ve been full every day. We’ve been apportioned every day. That speaks to the optionality of the markets that we serve,” Anderson said of the existing 300,000-bpd pipeline, adding that none of the oil producers that have committed to ship crude on the line for the next 20 years have attempted to back out.

“They remain just as bullish as they ever were. Their commitments are not in question,” Anderson said.

Currently, 5,000 people are working on the large-diameter pipeline project in Alberta and British Columbia, with work ramping up in the metro Vancouver area and other parts of B.C. next year.

At the same time, rival Enbridge Inc. is trying to complete its Line 3 replacement pipeline this year and TC Energy Corp. is building the Keystone XL pipeline project to the U.S. Gulf Coast, which is expected to be complete in 2023.

How quickly oil producers fill the Trans Mountain Expansion, which is underpinned by long-term take-or-pay contracts on 80 per cent of the line’s volume, will depend on whether the other pipeline projects are built in the same time frame, Anderson said.

“We’re confident those barrels will move once we come into service. It will depend somewhat on the status of other pipes and when they come into market,” he said.

This week, the International Energy Agency and British oil major BP Plc released bearish oil market outlooks. After posting its worst-ever quarterly results this summer, BP released an energy outlook Monday that, in the most bullish scenario, predicts oil demand peaking by 2030 at just over 100 million bpd — similar to where it was earlier this year before the pandemic crushed demand.

In a scenario where governments pursue net zero emissions policies, BP expects oil demand could plunge as low as 30 million bpd by 2050.

 Currently, 5,000 people are working on the Trans Mountain pipeline expansion.

Similarly, in a report released Tuesday, the IEA expects oil demand to decline from 101 million bpd last year to an average of 91.7 million bpd over the course of 2020 as the coronavirus pandemic forced lockdowns in major economies this spring and continues to threaten to derail the recovery with a second wave.

“The economic slowdown will take months to reverse completely while certain sectors such as aviation are unlikely to return to their pre-pandemic levels of consumption even next year,” the report noted, adding that global oil demand next is projected to reach 97.1 million bpd.

Alberta Premier Jason Kenney said Tuesday there are projections of an oil price recovery in 2022 and, “there will be a huge demand for oil and gas well into the future.” As a result, there is a continued need for new pipelines exiting Alberta.

His government took a stake in TC Energy’s 830,000-bpd Keystone XL pipeline project to the U.S. Gulf Coast earlier this year.

Kenney said the projections released this week show robust oil demand in the future and despite assumptions that “we can flick a switch and airplanes will operate on unicorn farts or something, but in the real world we’re going to be consuming hydrocarbon based energy for a long-time to come.”

Both the IEA’s projection Tuesday and the revised demand outlook released by the OPEC Secretariat on Monday reflect new expectations of a meaningful market downturn this year, Enverus chief economist Judith Dwarkin said.

“The penny is dropping that the demand outlook is gloomy. We’re moving toward a world where demand will be lower for longer strictly related to COVID,” Dwarkin said, noting that the IEA and OPEC projections of demand from earlier this year were too optimistic.

“What COVID has done is basically knock back five years of oil demand growth from the market,” she said.

Dwarkin said she expects oil demand will recover but that could take as long as four years.

“Even if you’re in a 60 million-barrel-per-day market, you’re still going to need to be investing and finding oil. There will be demand for it. It’s just a question of who will be supplying it,” Dwarkin said.

Financial Post

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