Guest post: Scott Stoness, Kinder Morgan Canada Vice-President, Regulatory and Finance
The Trans Mountain Expansion Project (TMEP) provides access to world oil markets via the Pacific Ocean. Trans Mountain is Canada’s only Asia Pacific oil pipeline connection, and the expanded system will give producers an important and unique transportation option to access to markets other than the United States.
The Government of Canada granted its approval for the Project following the National Energy Board’s review of TMEP that took almost three years and came to the conclusion, based on a review of evidence from Trans Mountain, oil producers, shippers and a broad spectrum of Intervenors, that the expansion is in Canada’s public interest.
As part of the regulatory process, Trans Mountain submitted an oil markets analysis report, Market Prospects & Benefits of the Trans Mountain Expansion Project, that says the expanded pipeline will operate “at capacity throughout the forecast period (of 20 years of operations)” — and that TMEP gives Western Canadian producers “an important long-term structural competitive advantage.”
Since first announcing the Project in 2012, as can be expected, a number of market factors have changed. Taking current conditions into consideration, in March 2017, 13 large and sophisticated oil shipping organizations recommitted to use 80 per cent of the capacity of the expanded Trans Mountain system by signing 15- to 20-year take-or-pay contracts to move oil on TMEP.
These commitments amount to an approximately $1.4-billion-per-year commitment and these parties would not make these commitments lightly. These shippers and Trans Mountain will cover the cost of the Project that will result in a number of benefits for Canadians.
The Project will result in increased netback, or returns, to Western Canadian shippers. Muse Stancil’s Market Prospects & Benefits report estimates $74 billion of benefits to the industry as a result of new market options. The Conference Board of Canada has estimated that the increased prices will result in 800,000 person years of employment.