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The growth in intermittent renewables requires a complementary fuel source
Bill Yardley, Enbridge
As Enbridge plots more investments in natural gas infrastructure and in renewables such as offshore wind projects, the company also said it expects oil demand to grow worldwide until 2035, “propelled by petrochemical demand and population-driven transportation demand” even as electric vehicles are increasingly adopted.
Competing oil pipelines also face mounting challenges in Canada and the U.S. in the face of government policies designed to curb carbon emissions.
The Parliamentary Budget Officer released an updated financial and economic report on the federally owned $12.6-billion Trans Mountain expansion project on Tuesday and found the profitability of the pipeline project is “highly contingent on the climate policy stance of the federal government.”
The federal government bought the existing Trans Mountain pipeline and the 590,000-barrels-per-day expansion project from Houston-based Kinder Morgan Inc. for $4.4 billion after adjustments in 2018. But the cost of the project has risen and the expected in-service date has been pushed out to December 2022 as a result of multiple court challenges.
Now, the PBO is concerned that additional climate-change policies from the federal government could lead to a scenario in which oil production growth from Western Canada is constrained, badly hurting the economic case for the TMX pipeline expansion, currently under construction from Alberta to Burnaby, B.C.
“Consistent with modelling from the Canada Energy Regulator, if policy action on climate change continues to become more stringent, it is possible for the Trans Mountain assets to have a negative net present value,” the PBO wrote in its report.
The report noted that the net present value of the TMX project could fall to between -$400 million and -$1.1 billion under scenarios in which the pipeline is under-utilized and collects lower tolls once existing tolls expire beginning in 2040.
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