Will Trans Mountain buyout even help?

CALGARY The promise of shipping more Canadian crude to fast-growing importers like China and India — and relying less on the U.S. — drew Prime Minister Justin Trudeau’s government into shelling out $4.5 billion for a pipeline project that was facing abandonment.

Whether that gamble will pay off is anything but certain.

With U.S. President Donald Trump’s trade wars showing no sign of abating and pipeline bottlenecks damping prices for Canadian crude, the Trans Mountain pipeline expansion may seem like a godsend.

But lost in the debate over the government’s purchase from Kinder Morgan Inc. is the fact that very few of the 300,000 barrels of oil and refined fuels a day the existing Trans Mountain line ships from Alberta to the B.C. coast are making their way to Asia.

In the past year, only two of the 48 tankers that entered the Westridge Dock or Parkland Burnaby terminals have departed directly for Asia, according to data compiled by Bloomberg. One of those vessels left for South Korea in April, and the other departed for China earlier this month. Both were carrying an estimated 550,000 barrels of crude.

The result is that essentially all of Canada’s crude oil exports for the first four months of the year have gone to the U.S., according to National Energy Board statistics.

Some doubt that the Trans Mountain expansion will change that trend.

The idea that Trans Mountain will help Canadian producers get better prices in Asia is “fiction,” said Jeff Rubin, an independent economist who previously served as chief economist of CIBC World Markets. “The highest prices for heavy oil are in the U.S. Gulf, and that’s because that’s where the greatest amount of heavyoil refinery capacity is.”

Refiners in Asia have typically paid lower prices for crude grades comparable to Canadian heavy oil, such as Mexican Maya, rather than higher ones, he said. Prices for that blend are about $8 a barrel less in Asia than on the Gulf Coast, he said.

Last year, about 54 per cent of the volume carried on Trans Mountain was crude oil shipped to Washington State refineries via the Puget Sound System, according to the pipeline’s website. About 42 per cent of the line’s crude and refined products made it all the way to the Burnaby storage terminal and the Westridge marine station. The remainder ended up at a refined-products storage facility in Kamloops.

Kinder Morgan Canada Ltd. expects that the majority of the capacity that the expansion is adding to the line will be for exports from Westridge destined for markets including Washington, California and Asia. However, actual destinations will depend on market conditions, the company said.

For now, Trans Mountain crude is going mostly to U.S. west coast refiners that have grown reliant on imports amid dipping output from Alaska and California.