Ruling Against TMPL Expansion, But It Was Already #3 Behind Line 3 And Keystone XL Timing To Add 1.205 Mmb/d Capacity

We think the market overreacted to the today’s Federal Court of Approval ruling against the 590,000 b/d Trans Mountain expansion and forgot that Trans Mountain was #3 in the order of new oil pipeline projects behind Enbridge Line 3 and TransCanada Keystone XL.  There is no other way to spin it except it was bad news for the project.  Industry is fortunate the Liberals have bought Trans Mountain otherwise the expansion project would likely have been shelved post today’s ruling.  Rather Liberal Finance Minister Morneau put out a very determined public resolve today that the Liberals will ensure the Trans Mountain expansion gets done.  But even if so, today’s ruling means that the in service timing will be delayed to some yet to be determined later date.  Prior to today, the Liberals had not said the targeted in service date post their formal acquisition of Trans Mountain.  Our view has been that, prior to today, in service was Jan 2022 at the earliest, perhaps more like mid-2022 and had dropped to #3 in the order of oil pipeline takeaway projects behind Enbridge’s 375,000 Line 3 replacement and TransCanada’s 830,000 b/d Keystone XL.   Line 3 and Keystone will add 1.205 mmb/d of capacity, equal to 30% of western Canada’s 2017 oil production of 3.975 mmb/d.  Trans Mountain has dropped to #3 in the order of key takeaway oil pipelines, but Morneau is making a strong statement to industry and investors that the expansion will get done.  So its going to have an even later in service date, but as #3 it will add another leg up to what Line 3 and Keystone XL will do for western Canada oil.

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