After years of cost overruns and environmental challenges, the 590kb/d capacity TMX pipeline entered commercial service in May 2024. Designed to ship heavy crude from Alberta to Canada’s West Coast, the pipeline follows the same route as the 300kb/d Trans Mountain Pipeline – designed primarily for lighter crudes and products. Six months on, what have been the knock-on effects of TMX’s start-up?

TMX flows in the spotlight

Historically, most crude originating from Alberta made their way to refiners in the US Midwest via pipeline or to the US Gulf Coast (USGC) by rail, a reality changed by the start-up of the TMX pipeline. Since June 2024, TMX has allowed crude from Alberta to flow to Canada’s west coast. Fig. 1 shows crude loadings at the Westridge terminal in Vancouver which have averaged around 360kb/d since the pipeline made its debut.

Fig. 1: Crude exports from Vancouver (kb/d)

The two main TMX grades attracting attention in the market include: the low-TAN heavy sour grade, Cold Lake (21° API, 3.8% S) and Access Western Blend, a high-TAN grade (22° API, 4% S) which is similar in quality to Basrah Heavy. Cold Lake typically commands a premium over AWB due to the differences in acidity levels and Cold Lake’s preference by US refiners.

Despite initial quality concerns by several West Coast refiners, between Jun-Nov 24, around 45% of TMX crude exports have regularly found their way to West Coast Californian refiners such as Marathon, Chevron and P66. One knock-on effect has been lower imports of certain Latin American grades, particularly Ecuadorean heavy sour Napo and Oriente. As Fig. 2 shows, both Napo and Oriente differentials have fallen against WTI since June 24.

Fig. 2: Napo and Oriente differentials v WTI (US$/b)

Source: REA, S&P Global Commodity Insights

Alongside Californian refiners, Asian-pacific players have also been active buyers, with China accounting for around 50% of TMX purchases since June 2024 (and almost 90% of Asia-bound shipments from Vancouver). Key buyers have included Unipec (for delivery to its 470kb/d Maoming refinery), PetroChina, Sinochem and Rongsheng – the largest buyer of TMX deliveries since Sept 24. Other key Asian buyers have included Japan’s Eneos, South Korea’s Caltex and India’s Reliance.

Fig. 3: Vancouver crude exports by destination and % to China (RHS)

Fig. 4: TMX Asia-Pacific buyers (kb/d)

The uptick in Canadian flows to Asia since June 24 has had a significant impact on Asian purchases of medium-sour Mars from the USGC. On average during 2024, Asian refiners purchased around 33kb/d of Mars – around 100kb/d lower y-o-y. Given that Mars is a major component of the Argus Sour Crude Index used by Middle East producers to price their exports to the US, it will be interesting to see how Mars crude differentials may be impacted in 2025 and what further impact TMX flows to Asia may have on USGC medium-sour crude pricing.

Currently, we see three major factors which have influenced TMX flows to Asia, namely:

Pricing and production plans of rival Latin American heavy sour grades: The price ceiling for TMX crude is heavily influenced by the delivered pricing of key heavy sour grades such as Colombian Castilla, Oriente and Napo.

Heavy sour balances and differentials: 2024 has seen tightness in the heavy sour crude market, driven not only by OPEC+ cuts but also the start-up of new refineries (e.g. Mexico’s Dos Bocas). Strong HSFO cracks have also helped, supported by better-than-expected bunker demand. While 2024 saw greater availability of Venezualan Merey (priced at around US$5-6/b discount to AWB), the grade is largely limited to Shandong buyers. In this sense, TMX adds another source of optionality for Chinese players who can arbitrage readily between sanctioned and non-sanctioned crudes.

Blending economics: Chinese players have become more comfortable with TMX’s high acidity over the past several months by blending high-TAN AWB with lighter crudes, particularly Russian ESPO, WTI and Murban. China’s refinery system can tolerate crudes with a TAN of 1-1.1 mg KOH/g. While AWB is higher (1.6 mg KOH/g), blending high-TAN TMX crude with lighter streams can increase naphtha yields, the key driver of Chinese oil demand over the medium-term.

Logistical challenges

Despite China’s growing accommodation of TMX crude, logistics will continue to remain a challenge in 2025. Despite the shorter voyage of Vancouver-China compared to USGC loadings, several logistical issues continue to impact TMX competitiveness, namely:

Draft restrictions: currently, Vancouver port has three berths that can accommodate Afra tankers, with draft restrictions limiting individual loadings to 550kb. Port restrictions mean that shippers can only load Aframax tankers, undermining VLCC economies of scale.

Limited reverse lightering options: one way to accommodate the port restrictions could be via reverse lightering onto more efficient VLCCs. However, the closest lightering zone to Vancouver is the Pacific Area Lightering (PAL) zone – roughly 1,000 nautical miles and four days away. So far, trading sources have noted that Chinese players have started looking at blending TMX crude with other sources at PAL to make the economics work. Nevertheless, the risk of incurring hefty demurrage costs due to potential misalignments in Afra arrival times remains an issue.

TMX Geopolitics: Trump and Canadian tariffs

One game changer to watch in 2025 remains the prospect of US tariffs on Canadian crude. President-elect Donald Trump has entertained the idea of a 25% tariff on US imports from Mexico and Canada once sworn into office on 20 Jan 25. Such a move would add around $15/b to the cost of sending Canadian crude to the US (based on Nov 24 prices). Nevertheless, if executed, such a move would transform TMX’s status as a swing grade between the US West Coast and Asia into a more readily accessible grade for Chinese players. As a result, we could see the following knock-on effects:

An additional 190-200kb/d of TMX crude flowing to Asia
Greater demand for Murban as blending grades to deal with high-TAN AWB
Greater US West Coast demand for Latin American medium and heavy sources, particularly Ecaudorean Napo and Oriente.

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