Canada, The Unexpected Winner in the Global Oil Boom
- The Trans Mountain Expansion Project, now finally completed and operational after years of delays, is changing the fortunes of the oil sands.
- Canada’s oil sands producers have started ramping up production last year in anticipation of the start-up of exports through the TMX pipeline.
- The production increases in the oil sands are the result of the expansion of operational projects with existing infrastructure.
Canada’s oil output is booming as producers ramp up projects and extraction amid expanded market access and narrowing discounts of the Canadian heavy crude to the U.S. benchmark.
The Trans Mountain Expansion Project, now finally completed and operational after years of delays, is changing the fortunes of the oil sands producers in Alberta, giving them access to markets in Asia and the U.S. West Coast.
Constrained for years due to insufficient egress, Canada’s oil now has nearly 600,000 barrels per day (bpd) of additional market access. The expanded Trans Mountain pipeline is tripling the capacity of the original pipeline to 890,000 bpd from 300,000 bpd to carry crude from Alberta’s oil sands to British Columbia on the Pacific Coast.
And producers are taking advantage of this. They began ramping up production at the end of last year in anticipation of the Trans Mountain Expansion (TMX) start in the first half of this year. Canadian oil firms now get more bang for their buck as the discount of Western Canada Select (WCS), the benchmark for Canadian heavy crude sold at Hardisty in Alberta, has narrowed relative to the U.S. crude oil benchmark, West Texas Intermediate (WTI) in recent weeks.
Moreover, the production increases in the oil sands are the result of the expansion of operational projects with existing infrastructure, so the capital expenditure – which is very high for this type of crude extraction – has been lower than for building projects from scratch.
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