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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Canada’s $26 Billion Investment In Trans Mountain Pipeline May Not Pay Off

TransMountain Pipeline

The Trans Mountain Expansion Project promised in the 2010s to help Canada’s oil sands producers get their crude to the Asian markets from the Pacific Coast. After years of delays and enormous cost overruns, the expanded oil pipeline currently owned by the federal government of Canada is about to enter into service early next year.

The government has never intended to keep its ownership in the project that carries crude from Alberta’s oil sands to British Columbia on the Pacific Coast and which will triple the capacity of the original pipeline to 890,000 barrels per day (bpd) from 300,000 bpd.

Canada has started talks with indigenous groups interested in buying ownership of the expanded project. But pipeline operators and institutional investors are not too keen to buy the Trans Mountain Expansion Project, analysts tell Reuters, because of the high costs of financing for companies and because many investment funds prefer not to sink money into fossil fuel projects these days.

An ongoing dispute over the proposed shipping tolls of the pipeline amid the huge construction cost overruns is also muddying the waters for potential buyers.

All these hurdles suggest that the federal government of Canada may never fully recover the more than a dozen billion U.S. dollars of costs to have the project up and running.

At the start of the project, fierce opposition in British Columbia forced Kinder Morgan to reconsider its commitment to expand the Trans Mountain pipeline. So the Government of Canada reached an agreement with Kinder Morgan back in 2018 to buy the Trans Mountain Expansion Project and related pipeline and terminal assets. That cost the federal government $3.3 billion (C$4.5 billion) at the time. Since then, the costs for the expansion of the pipeline have quadrupled to nearly $22.6 billion (C$30.9 billion) and could continue to increase.

At the end of September, Trans Mountain received a ruling from the Canada Energy Regulator (CER) that approved its proposed deviation to pipeline routing within the previously agreed to the right-of-way on Stk’emlúpsemc te Secwépemc (SSN) lands near Pipsell (Jacko Lake), BC. The approved change of route in the section means that the pipeline could be fully completed and in service in early 2024.

Related: The U.S. Allocates $7 Billion Of Grants To Hydrogen Production Hubs

The project remains in the $22.6 billion (C$30.9 billion) “range,” and only 16 kilometers of pipeline are left to lay, Trans Mountain CEO Dawn Farrell told Calgary Herald’s Chris Varcoe last week.

Trans Mountain targets to have first oil to the Westridge Marine Terminal by the end of the first quarter of 2024, Farrell said in an interview with Calgary Herald.

A sale of Trans Mountain could be completed in late 2024 or early 2025, Farrell said, adding that finding a buyer of a project of more than $22 billion would take time.

Indigenous-led group Project Reconciliation and Chinook Pathways, a partnership between Pembina Pipeline and Western Indigenous Pipeline Group (WIPG), are interested in bidding to own the whole or part of Trans Mountain.

But other potential buyers, which years ago may have been interested in getting their hands on such a large energy infrastructure project, may stay away. High financing costs with the high interest rates and the reluctance of many institutional investors to be associated with fossil fuels is limiting the pool of possible new owners of Trans Mountain.

The dispute over shipping tolls also creates uncertainties. Cenovus Energy and other companies say that parts of the proposed shipping toll are too high. Final tolls are to be established after the expanded pipeline enters into operation, so uncertainties over how much a new owner would be receiving from shipping fees are still high.

The Commission of the Canada Energy Regulator (CER) said this week it expects to take a preliminary decision on interim tolling this autumn to ensure tolling is in place when the line becomes operational.

“Trans Mountain indicates that it will file for approval of its final tolls once as-built costs are known, following the project’s completion,” CER says.


Based on several factors, including proceeds from tolls, Trans Mountain has been valued at up to $18 billion (C$25 billion) by five analysts and investors in a Reuters survey. 

With costs running much higher than originally expected, Canada could struggle to recover all the money it has sunk into the pipeline expansion project.

By Tsvetana Paraskova for Oilprice.com

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  • john tucker on October 16 2023 said:
    Almost all crude oil is priced competitively with world markets. But the output from the Canadian oil sands has been captive to the prices that the USA will pay for it because they have been the only place it could be delivered too, and much of that delivery had to happen over Warren Buffet's railroads. Consequently the spot prices posted at Hardesty have always been $20 or more less than any other crude oil on earth.
    Now, China can bid directly against the USA.
    And, now, Suncor can begin expanding its production again.
    It will not be Canada that suffers when the new pipeline goes into full use.
  • George Doolittle on October 16 2023 said:
    Will Canada producing 5 million barrels of oil per day now the amount of oil meant to travel through this pipeline is certainly not a drop in the bucket but also no all that Canada can produce as well far from it. Great news for the US West Coast Refinery Complexes which have been energy starved going on 50 Years with the collapse of Southern California oil production. If there be included a natural gas pipeline in this more great news for the entire Western Coast of North America to include even energy powerhouse Alaska and Mexico which still have effectively unlimited demand for said product depending upon price of course. Current West Canada Select future price are near half the price of WTI and Brent but yes the "fee structure" does matter for operating a pipeline such as this in what is a geologically unstable Region. Like I said however the product is there both now and going forward.

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