Pipeline help on the way

Prompted by interest from shippers, TransCanada is contemplating expansion and extension of its planned Keystone crude oil pipeline from the U.S. Midwest to the Cushing, Okla., midcontinent hub and possibly to the Gulf Coast refinery region.

Once the initial US$2.2 billion, 435,000 barrels-per-day leg from Alberta to Wood River/Patoka, Ill., comes into service in late 2009, TransCanada said it has enough binding contracts to build a 155,000 bpd, US$700 million extension to Cushing, with an in-service date of 2010.

That addition will allow TransCanada to offer shippers the choice of delivering to either Wood River or Cushing with volumes totaling 600,000 bpd.

In addition, TransCanada Chief Executive Officer Hal Kvisle said the company has started marketing capacity to the Gulf Coast.

He said the commitments for the Cushing extension cover average terms of 18 years for 495,000 bpd, of the total capacity of 590,000 bpd, “confirming the value of Keystone as a cost-competitive way to link growing oil sands supply to U.S. energy markets.”

It also provides hope that Canadian oil producers can avoid the pipeline crunch, which a new Canadian Association of Petroleum Producers survey has warned could see U.S. refinery demand outstrip pipeline capacity by 29 percent over the next nine years unless pipeline projects are accelerated.

Pending approval from Canadian and U.S. regulators, TransCanada will start construction of the 1,845-mile Keystone link in early 2008.

Meanwhile Enbridge, TransCanada’s chief Canadian rival, has teamed up with ExxonMobil to study moving 400,000 bpd of Canadian oil from Patoka to Beaumont, Texas, and then on to Houston.

Enbridge has also filed an application with the National Energy Board to ease a looming bottleneck on its pipeline system in Alberta.

The C$300 million project covering 85 miles will offer 880,000 bpd of capacity when it starts service by early 2009.

—Gary Park