Why Trans Mountain wants to expand when the oil pipeline isn't even full

A little more than one year after completing construction of the Trans Mountain expansion oil pipeline, the crown corporation is pursuing two different methods to increase how much oil can be exported.

The move comes at a time when the pipeline still isn't operating at full capacity.

The $34-billion expansion project began transporting oil from Edmonton to the Vancouver area in May 2024. Currently, the pipeline is operating at about 80-85 per cent of its capacity, Trans Mountain officials say.

The plan was to only begin looking at possible increases to the pipeline in about 2028, but the timeline was sped up as oil production in Alberta continues to climb.

The physical size of the pipeline won't change, but the crown corporation is exploring the use of drag reducing agents to increase the amount of oil that can be transported. A second project would explore building stronger pumping stations to push more oil through the pipe.

The drag reducing agents are chemicals that would have a relatively low price tag, said Todd Stack, Trans Mountain's chief financial officer, and should result in about a 5-10 per cent increase in capacity or about 50,000-85,000 extra barrels of oil per day.

Adding more pumping power would be more expensive and take longer to complete, said Stack, estimating the cost at about $3 billion to $4 billion. The crown corporation will spend the next year exploring the optimization project before making a final investment decision next year, followed by what would be another few years of construction.

"I'm not actually concerned," said Stack about funding the optimization, since the cost of the project could be paid with profits generated from current operations or through adding debt.

The federal government will have to approve the projects before Trans Mountain would proceed, said Stack.

The expanded Trans Mountain pipeline has a total capacity of 890,000 barrels.

The crown corporation is on track to return $1.25 billion to Ottawa through interest, fees and dividends by year-end.

So far, everything is running smoothly with the Trans Mountain expansion and it's operating "spectacularly well," he said.

The export terminal in Burnaby, B.C., is designed to handle 34 tankers a month, but so far is running closer to 23 vessels per month. The ships are only being loaded to about 70 per cent full, said Stack, because of the depth of the Burrard Inlet.

The Vancouver Fraser Port Authority has said preliminary work on a plan to dredge Burrard Inlet to accommodate fully loaded oil tankers is underway.

Oil production growth is being fuelled by the ever-expanding oilsands industry in northern Alberta. Oilsands production is on pace to reach an all-time high this year as output is expected to grow by five per cent in 2025 compared to last year.

There are no new large-scale oilsands facilities being built, but rather the development of a plethora of relatively small expansions and improvements over the next five years from at least a dozen different companies including Cenovus, Suncor, ConocoPhillips, MEG Energy, CNOOC, Imperial Oil, Canadian Natural Resources, and Strathcona Resources.

Without any optimization projects by pipeline companies, there could be oil export constraints out of Western Canada as early as mid-2027, according to RBN Energy, an energy markets consultancy.

Pipeline companies such as Enbridge and South Bow, the Canadian company that operates the Keystone system, are exploring how to export oil with existing infrastructure.

If Trans Mountain and other pipeline companies pursue proposed improvements, there should be enough space to export oil out of Western Canada for the next five years, said Stack.

"We're good until 2030," he said, while on stage at an energy conference in Calgary last week.

Oilsands production is expected to average 3.5 million barrels per day this year. By 2030, production could grow by another 500,000 barrels per day, according to RBN Energy, because of all the proposed new projects in the region.

The completion of the Trans Mountain expansion project last year has increased the total western Canadian crude oil export capacity by 13 per cent and export capacity to tidewater in Western Canada by about 700 per cent, according to a report released Wednesday by the Canada Energy Regulator.

The pipeline has also resulted in Canada's crude-by-rail exports to fall to levels not seen in over a decade, the regulator said.

New data from Statistics Canada shows oil pipeline shipments from Alberta to British Columbia increased more than fivefold (+449.9 per cent), during the first 12 months of the expanded Trans Mountain project.