October 2024, Vol. 251, No. 10
Editor's Notebook
Editor’s Notebook: TMX Expansion Faces Quality Concerns from West Coast Refiners
By Michael Reed, Editor-in-Chief
(P&GJ) — For a couple of months now, U.S. West Coast oil refiners have been voicing concerns about some of the attributes of crude oil being shipped along the recently completed Trans Mountain pipeline expansion (TMX) from Canada.
At the center of problems on the West Coast are the high vapor pressure and acidity limits prescribed by California regulations and limitations at the physical plants, with refiners expressing reservations about the high sulfur content of the crude and other conditions that could damage equipment and increase air pollution.
The concern is so great that, 10 companies, including Chevron and refiner Valero Energy, wrote to the Canada Energy Regulator (CER), asking that TXM’s technical specifications be narrowed to address the issue.
Specifically, Valero wrote that the vapor pressure limits used to measure the volatility of crude oil are “wholly inappropriate” for West Coast refining, which represents a 2.5 MMbpd market.
Chevron explained in its communications with the CER that the existing pressure limits exceed the regulatory top-end at both of its affected refineries and that high pressures cause more vapor to escape from tanks.
Expressing a different opinion, Plains Midstream and Trans Mountain shipper Cenovus Energy wrote to the CER to endorse the current limits.
It should be noted that Los Angeles area refineries are the only large refineries that serve as destinations for the heavy sour crude grades on the West Coast.
“We’re kind of caught in the middle between the different perspectives of customers,” Trans Mountain CFO and Strategy Officer Mark Maki said in an interview with Reuters.
He added the company was looking into the possibility of adding a second pool of crude with different technical specifications “to address the needs” for the pipeline system dedicated to West Coast transportation.
For years, the Trans Mountain pipeline has had higher vapor pressure limits than other export pipelines due its transportation of refined products, in addition to crude oil.
Another problem, pointed out by oil producer Canadian Natural, which ships on the pipeline, was that the higher vapor limit is resulting in the possibility that lower-value light oil will be blended in with Trans Mountain crude, bringing down its value.
Additionally, heavy crude is sour, meaning it contains more sulfur, which limits how much of it can be processed by West Coast refineries due to the limitations of sulfur-removal systems at those facilities.
As you may have hypothesized, West Coast refineries will be slow to voluntarily invest in expensive upgrades, leaving the ball, to some extent in Trans Mountain’s court, where the company began a review of technical specifications in May.
CER, as of this writing, has yet to render a regulatory decision on the matter.
The $24.84 billion (C$34 billion) expansion, which consisted of adding a second pipe to the original 715-mile (1,150-km) pipeline, from Alberta to Burnaby started operations in May and has nearly tripled shipping capacity to Canada’s Pacific Coast to 890,000 bpd.
The project also included a 1.6-mile (2.6-km.) tunnel, 13.1-foot (4 meters in diameter) between the Burnaby Terminal and Westridge Marine Terminal.
TMX operations were expected to bring US$14.4 billion (C$9.2 billion) to Canadian GDP and $US2.04 billion (C$2.8 billion) in taxes over the next 20 years, according to an Ernst & Young report in April.
Additionally, the expansion prompted a temporary to the cost of transporting some of Canada’s heavy crude to the U.S. Midwest and Gulf Coast, which began in October. U.S. imports of Canadian crude hit record levels in July as TMX volumes increased.
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