Trans Mountain Pipeline Expansion Likely To Cost the Canadian Government Billions of Dollars

The Trans Mountain pipeline expansion, once seen as a savior for Canadian oil by offering a key export channel for Canadian producers to reach Asian markets, is now looking like it will be remembered very differently and negatively by investors and the Canadian government. A loss between CAD 15 billion and CAD 20 billion (based on a CAD 10 billion-CAD 15 billion valuation) is likely, with the potential for a higher loss still if the pipeline sees further cost increases. We continue to see Enbridge’s Mainline system as the best alternative for the Trans Mountain expansion, as struggles by the Trans Mountain expansion mean more barrels remaining on the Mainline. As it stands, a vicious cycle of higher costs and higher tariffs for the Trans Mountain expansion serves as further fuel for shippers to commit to the Mainline (a major reason behind our narrow moat for Enbridge) and related U.S. expansions as it would likely be cheaper to ship Canadian barrels down to the Gulf Coast for export as it stands now, completely undermining the original purpose of the Trans Mountain expansion.