Trans Mountain anticipates stable pipeline demand despite pandemic

Canadians are staying home in droves and burning less fuel thanks to the COVID-19 pandemic — but the Trans Mountain pipeline corporation forecasts shipping demand on its existing pipeline will remain stable in 2020.

Trans Mountain details the bullish forecast in several financial reports posted on its website over the last few days.

Trans Mountain acknowledges "widespread epidemics or pandemics, and economic conditions" will create risks and uncertainty for the pipeline corporation, acquired by the federal government in 2018. It still predicts little to no change in the amount of product it ships; its forecasting an average of 316,000 barrels per day this year, a modest increase over the 313,900 barrels daily it averaged on its main line in 2019, according to its annual report.

But three months into 2020, a more recent earnings report shows that Trans Mountain failed to meet its anticipated shipping target. The government-owned pipeline shipped an average of 297,000 barrels per day in the first three months of this year, according to Trans Mountain's first-quarter results.

In that same report, Trans Mountain acknowledges the price of western crude oil hit rock bottom in the first quarter due to two crises landing at once –– the pandemic and the oil production war between Russia and Saudi Arabia.

The beginning of a decline?

Finance Canada, the federal government department that oversees Trans Mountain, also was not available for comment.

Trans Mountain responded to CBC's request for an interview after this story was posted. Its communications manager, Ali Hounsell, said it's no surprise that pipeline demand has fallen.

"We have seen less excessive demand from our customers," Hounsell said Tuesday. "We have all seen in our daily lives changes to how people use fuels."

But Hounsell said that while shipping requests aren't as high as they used to be, the pipeline remains at full capacity.

So why is a pipeline running at full capacity shipping less oil? Hounsell said it has to do with the fact that Trans Mountain is the only pipeline in North America that can ship both light and heavy crude. Lighter oil has a lower density, so more barrels of it can be shipped, while heavy oil has a higher density.

Hounsell said meeting or exceeding Trans Mountain's forecast depends on the grade of oil that's being shipped.

But, Robyn Allan, an independent economist and frequent critic of the Trans Mountain pipeline expansion project, predicts further shipping declines.

"We were already seeing that number of barrels not being met, and now with COVID-19, I think anybody realistically looking at this would expect that the numbers would be lower still," Allan said.

'Short-term shock' and pipeline expansion still needed 

But Richard Masson, chair of the World Petroleum Council, said he sees demand on the existing Trans Mountain pipeline remaining stable, despite demand shocks caused by COVID-19 and recent geopolitical events.

Masson said that, production cuts notwithstanding, Alberta still ships about 3 million barrels a day and pipelines like Trans Mountain will remain the preferred way to move Alberta oil.

"(The Trans Mountain pipeline) is one of the shortest routes to get to market," he said. "And it is very often oversubscribed, which is why they are working on the expansion project."

Masson said demand for oil is turning around after significant declines. Diesel is still needed for trucks, and consumers in China are shunning public transportation and opting to drive as cities emerge from pandemic restrictions.  

"This looks like, at least at this point ...  a very short-term shock with both supply and demand dropping," Masson said. "It's absolutely still necessary to have Trans Mountain, Keystone and Enbridge Line 3."

The upcoming Trans Mountain expansion project will twin the existing Alberta-to-British Columbia line and boost the pipeline's capacity from about 300,000 to 890,000 barrels per day.

In February, Trans Mountain estimated the cost of the expansion at $12.6 billion, with service expected to start at the end of 2022. The expanded pipeline will directly produce 400,000 tonnes of greenhouse gas emissions annually, which has been factored into Canada's emission targets.

Although it's difficult to account for indirect emissions, Environment and Climate Change Canada estimates the upstream emissions add 21 and 26 megatonnes of carbon dioxide per year, based on 2015 calculations. That number doesn't account for land-use changes and electricity or other fuels used elsewhere.

The Alberta government has said that, without this expansion, Canada would continue to sell its oil abroad at a steep discount that costs the Canadian economy $16 billion a year.