The expanded Trans Mountain (TMX) oil pipeline, which began commercial operations in May, has yet to significantly affect crude costs for U.S. West Coast refiners, according to industry sources. The TMX expansion has tripled the pipeline’s capacity to 890,000 barrels per day (bpd), enhancing access to Canadian heavy crude for West Coast refineries and opening a new export route to Asia.
Despite expectations that U.S. West Coast refiners would be primary beneficiaries of the increased Canadian crude supply, approximately two-thirds of the additional TMX barrels have been exported to Asian markets. Brian Mandell, executive vice president of marketing at Phillips 66, expressed surprise at this distribution during a recent investor call.
Refiners had anticipated that access to lower-cost Canadian heavy crude would improve earnings, particularly in California and Washington. However, independent refiners are currently facing weaker fuel demand, which has negatively impacted refining margins. For instance, Phillips 66 reported a drop in realized margins to $10.01 per barrel, down from $15.32 a year earlier, while Marathon Petroleum’s margins fell from $22.10 to $17.37 per barrel.
Analysts had expected that the influx of Canadian crude would replace heavy oil imports from Latin America and the Middle East, leading to savings on shipping costs. However, the anticipated narrowing of the price differential for Western Canada Select (WCS) versus U.S. crude did not materialize in the first three months post-expansion.
Key refineries on the West Coast, such as Marathon’s Los Angeles facility, which has a capacity of 365,000 bpd, were expected to be major recipients of TMX crude. Other refineries, including those operated by Valero and Chevron, also planned to utilize TMX supplies.