CALGARY (Reuters) - Canada's Trans Mountain oil pipeline has downgraded forecasts for the amount of oil expected to flow through its system over the next three years, documents filed by the operator show, as use of the newly expanded pipeline increases more slowly than expected.

The lower forecasts, filed by Trans Mountain with the Canada Energy Regulator last month, have not been previously reported. They indicate unwillingness by oil companies to pay higher tolls the government-owned Trans Mountain has been charging customers to ship oil on the newly expanded pipeline, analysts said.

They said 20% of the pipeline's capacity that is reserved for spot shipments is being underutilized because shipping costs are higher than the Enbridge Mainline system, the largest crude pipeline system in North America, which moves oil from western Canada to markets in Eastern Canada and the U.S. Midwest.

The lower forecasts raise questions about the Trans Mountain pipeline's ability to generate revenue and attract a private sector buyer. Ottawa has indicated it ultimately wishes to sell the pipeline.

Lower expected usage also shows the difficulty of diversifying Canadian oil exports away from the U.S., which buys 90% of Canadian crude. Trans Mountain is Canada's only operational east-west pipeline and the only outlet to Asia and non-U.S. markets. One possible wild card: analysts and Trans Mountain itself have said business could improve quickly if U.S. President Donald Trump slaps tariffs on Canadian oil.

The expanded 890,000 barrel-per-day (bpd) pipeline, which runs from Alberta to Canada's Pacific Coast, started service in May 2024. At that time, and as recently as November, Trans Mountain was forecasting 96% utilization on the pipe every year starting in 2025, its first full year of operations.

The latest documents do not show the pick-up the pipeline operator expected. In its first eight months, Trans Mountain saw only 18,500 bpd of spot shipments, compared to a forecast 30,600 bpd. Total utilization was 77% for 2024, well shy of the 83% that had been forecast.

The new forecasts are for the pipeline to be 84% full this year, 88% full in 2026 and 92% full in 2027. The pipeline now is not expected to reach 96% utilization until 2028.

A Trans Mountain spokesperson said in an email to Reuters on Tuesday that spot shipments depend on market factors including Canadian crude production levels, global crude oil market hub pricing differentials, and marine freight rates.

Analysts cited massive budget overruns during construction, and noted that last spring Trans Mountain hiked the tolls it charges customers to ship oil. Total construction costs came to about C$34 billion, nearly quintuple a 2017 estimate.

While approximately 70% of cost overruns will be borne by Trans Mountain, the remaining third - more than $9 billion - are considered "uncapped costs" which increase tolls under a formula agreed to by shippers and approved by the Canada Energy Regulator more than a decade ago.

As a result, contracted shippers now pay nearly twice what Trans Mountain had estimated in 2017. Spot shippers pay even higher tolling rates.

Some of the main contracted shippers - including Canadian Natural Resources Ltd ( CNQ ) and Cenovus Energy ( CVE ) - have been pushing back. A regulatory hearing is planned this year to determine whether the higher tolls are fair.

'PROBLEM WITH PIPELINES'

Trans Mountain's main rival, the Enbridge Mainline which takes crude to the U.S. Midwest and eastern Canada, offers 100% spot capacity. Its tolls are roughly half Trans Mountain's rate.

An Enbridge ( ENB ) spokesperson said in an email on Tuesday that shipper demand for space on the Mainline has exceeded supply "for most months" since the Trans Mountain expansion opened.

Rory Johnston, an energy analyst and founder of the Commodity Context newsletter, said Trans Mountain's revised forecasts illustrate that shipping on the pipeline is "too expensive" for some oil producers.

"This is the fundamental problem with pipelines, and why it's so difficult to get any private actors in this space anymore," Johnston said.

Trans Mountain could see a rapid uptick in usage if the U.S. imposes tariffs on Canadian oil imports, said Richard Masson, executive fellow at the University of Calgary's School of Public Policy and former CEO of the Alberta Petroleum Marketing Commission.

It was unclear if oil would be included in President Donald Trump's tariff announcements expected on Wednesday.  

Trans Mountain volumes "could change on a dime if conditions change in the U.S.," Masson said.

As a result of lowering its capacity utilization forecasts, Trans Mountain is also forecasting lower revenue for the next three years. Its revenue projections have been lowered to $2.7 billion for 2025 from a prior estimate of $3.0 billion, $2.9 billion from a prior estimate of $3.1 billion for 2026, and to $3.0 billion in 2027 from a prior estimate of $3.2 billion.