You did know that the Trans Mountain pipeline expansion is to be completed in the second half of 2023? It only cost the Canadian government $4.7 billion, when it was purchased. And it was only expected to cost another $9.1 billion to twin the line, and add heaters so that the line could pump tar sands bitumen over the Rockies to Burrard Inlet for shipment around the Pacific Ocean. And the good news was that the pipeline had commitments from tar sands companies for over $20 billion worth of shipments over the next 20 years.
But the only hiccup in all that good news is that over the years of twinning and building and quietly ignoring the objections to this plan, the cost of completing all this good work has more than doubled to $21.4 billion.
Unlike with our grocery stores in Canada, who can just raise their prices willy-nilly when their costs go up, you cannot do that with bitumen. Bitumen has the unfortunate problem that it costs money to convert it to ersatz crude oil. Just to heat the water that is used to wash the sand out of the tar sands bitumen uses 100 cubic feet of natural gas for every barrel of bitumen. It also causes a great deal of pollution to create a chemical compound that can then be turned into things like gasoline which carry on polluting. It is something of a lose-lose situation.
To make matters worse, an independent third party has studied Trans Mountain’s prospects. The Institute for Energy Economics and Financial Analysis based in Ohio has studied the various reports from Trans Mountain and other pipelines in North America. The institute does not believe that the bitumen from Alberta will find any long-term market in Asia.
It is this problem with bitumen that it is always discounted below the cost of real crude oil. At a time when West Texas crude oil is being quoted in North America at just around US$90 per barrel, the best price quoted on Alberta bitumen would be less than $60 per barrel. I think the saying is that Alberta hearts are happiest when OPEC wants more than $100 per barrel of crude.
Copyright 2023 © Peter Lowry
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