Achi news desk-
The recently completed Trans Mountain pipeline expansion will boost Canadian oil prices for “years” to come, an executive with oil sands producer MEG Energy Corp. said.
“It’s great for industry and Canada to have that tremendous asset available,” MEG vice-president of marketing Erik Alson said during a conference call with analysts to discuss the company’s first-quarter earnings.
Canadian heavy oil has historically sold at a discount to lighter US crude, partly due to differences in product quality and transportation costs, but also due to a lack of pipeline export capacity that has limited market access for Canadian oil.
At times, that decline has been severe.
Rising oil sands production and limited pipeline space in the fall of 2018 caused the price of Canada’s benchmark heavy oil, known as Western Canada Select, to sell nearly US$50 per barrel below the US benchmark West Texas Intermediate. The Alberta government ended up curtailing oil production in the province for a time to address the problem.
A similar problem occurred in 2012-2013, prompting then-Alberta premier Alison Redford to blame what she called a “bitumen bubble” for a huge shortfall in government revenue.
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A 2020 study by IHS Markit estimated that insufficient pipeline export capacity resulted in US$14 billion in lost value for Canada between 2015 and 2019.
But the expansion of the Trans Mountain pipeline is expected to change things.
The expansion, which marked its official opening last week, gives Canadian oil shippers access to an additional 590,000 barrels per day of pipeline capacity and opens up new markets for oil sands products in Asia and along the Pacific Coast. US.
MEG is one of the main beneficiaries of the Mynydd Traws expansion, with 20,000 barrels per day of contracted capacity in the pipeline.
Prices for Canadian heavy oil, and the WCS-WTI differential narrowed, in April in anticipation of the start of the pipeline expansion and Alson said on Tuesday that he expects that to be a long-term trend.
“With this critical infrastructure now complete, we anticipate that light-heavy differentials will remain narrow for years,” he said.
Sandsands companies have had years to ramp up production before Trans Mountain comes online, since the pipeline expansion was first proposed a dozen years ago and took more than four years to build. Many analysts have suggested that the pipeline will be filled quickly, something Alson acknowledged.
“As an industry, we have a history of filling available exits, and I think that will happen again over time,” he said.
“There are various estimates as to when that might happen. We have seen (projections) as recently as two years, others within five or six. Our way of thinking is closer to the end of that period.”
Alson said he doesn’t expect another oil pipeline to be built in Canada. But he said expansion of Enbridge Inc.’s Main Line pipeline network could. in the future, which has been expanded many times in its 75-year history, offer some relief to oil shippers once Trans Mountain is full.
He said there may also be ways to improve efficiency, or “de-bottleneck” other existing pipelines without starting from scratch with new construction.
MEG Energy Corp said. that it earned $98 million in its first quarter, up from $81 million during the same quarter last year.
The Calgary-based company’s revenue totaled $1.4 billion, down from $1.5 billion a year earlier.
Diluted earnings per share were 36 cents, up from 28 cents.
Bitumen production averaged around 104,000 barrels per day during the period ended March 31.
Former chief operating officer Darlene Gates stepped into the role of chief executive of MEG on May 1, replacing outgoing CEO Derek Evans.
& copy 2024 The Canadian Press
