The federal budget, brought down by Liberal Finance Minister Bill Morneau on Feb. 27, included a sidebar box and chart called 鈥淔ocus-Pipeline and Refining Capacity.鈥�
The sidebar stated, 鈥淪tarting in 2017, Western Canadian crude oil supply was projected to outstrip the combined capacity of existing pipelines and the region鈥檚 refining capacity. This means that the industry is now having to rely on higher-cost rail to transport a growing share of supply until additional pipeline capacity comes on stream.
鈥淔urther, with very little spare capacity, the impact of unexpected pipeline or refinery shutdowns (such as the recent temporary shutdown of the TransCanada Keystone pipeline) could become larger, resulting in increased volatility in prices for Canadian producers. This situation is expected to prevail into 2020 until major pipeline projects鈥� such as the Trans Mountain Expansion Project, the TransCanada Keystone XL pipeline and the replacement of Enbridge鈥檚 Line 3鈥攂ecome operational, diversifying our export markets and providing additional capacity.
鈥淭he discount on the Canadian effective price (CEP) vis-脿-vis WTI has risen to over US$20, more than double its 2017 average (US$9.61). Futures contracts currently suggest that the differential between WTI and the CEP will narrow to the US$15 range by the summer, in line with a return to full capacity of the TransCanada Keystone pipeline and as rail transport adjusts to higher volumes, and to remain at this level on average over the 2018鈥�2022 forecast horizon.鈥�
