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Canada’s TMX Project Nears Completion – Total Project Cost Estimated at USD 23 Billion

Canada’s Trans Mountain Expansion (TMX) project nears completion as the operator company files an application for tolling expenses. The project is expected to get completed at a cost of USD 23 billion and will transport oil at 890,000 bpd capacity from Alberta to British Columbia. 

Jun 8, 2023

TMX Project

The Trans Mountain Expansion (TMX) project of Trans Mountain Corp (TMC), Canada, is expected to be near completion as the company has submitted a tolling application. The project which started over a decade ago is slated to commence operations in Q1 2024. The project has faced significant challenges and soaring expenses. In March, TMC projected a cost of USD 23 billion, over four times the initial estimate, with an expectation of further increase.

The TMX project aims to triple the flow of crude oil reaching 890,000 bpd from Alberta’s oil sands to Burnaby, British Columbia. 

TMC submitted an application to the Canadian Energy Regulator (CER) on June 1, to propose a base toll ranging from USD 8-9 per barrel, depending on the type of crude oil and its final destination. The proposal is significantly higher than the initially expected toll of approximately USD 4.50 per barrel. A discount was also proposed for shippers committing to over 15 years, or more than 75,000 bpd volumes.

The application states that the toll is based on the latest cost estimate and might be reviewed for an increase of USD 0.05 per barrel for every additional USD 74.5 million spent on uncapped costs. An increase of USD 6.8 billion is estimated in the costs. Uncapped costs encompass specific pipeline segments and other factors such as indigenous and community consultation.

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Several analysts have projected losses for the Canadian government, which took over the project in 2018, and difficulty in recovering the invested funds.

Mr. Stephen Ellis, a Morningstar analyst, shared, “TMX is really trapped between a rock and a hard place. It is unlikely to be able to charge a rate compatible with earning viable returns on a CAD 31 billion investment.” He estimated the final project cost to be around USD 11.2 billion.

Moreover, as per Mr. Ellis’s projections, TMX may be vulnerable to undercutting by rival projects as the Canadian oil market will have a surplus export capability starting next year.

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