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New pipelines to move heavy oil markets
Gary Park For Petroleum News
Canada could soon remove 9 million barrels of crude from the heavy oil market, followed next year by another 5 million barrels.
The 9 million barrels is what it will take later this quarter when TransCanada starts filling the 2,900-mile Keystone crude oil pipeline from Hardisty, Alberta, to the Wood River-Patoka refinery region in Illinois.
The process of line fill is due to start this quarter and take about 90 days, allowing Keystone to start operations in the first quarter of 2010.
TransCanada rival Enbridge has scheduled line fills in the second quarter of 2010 for its 450,000 bpd Alberta Clipper pipeline which will remove about 5 million barrels of heavy oil from the market, said Calgary-based investment dealer Peters & Co.
Although Keystone is not officially disclosing how much crude will be needed to fill the pipeline, Peters calculates 9 million barrels, which some say could give a temporary boost to heavy oil prices if it removes about 6 percent of Canadian production from the market.
Analyst expects differentials to tighten Jared Layton, a crude oil specialist with Phoenix Energy Marketing Consultants, suggested that whatever Keystone needs will likely tighten heavy oil differentials, because heavy oil sells at a discount to light crude.
The shrinking output from Mexico and Venezuela this year has already reduced that price differential to a current 12 percent from 22 percent last year and the introduction of Keystone could shrink the gap even more.
For every C$1 narrowing of the spread over a full year add about C$340 million to the Canadian industry’s top-line revenues.
Keystone is expected to start drawing about 100,000 barrels per day once the process starts and Keystone becomes the largest new pipeline in years to join the North American network.
Keystone’s initial phase to Wood River-Patoka will have initial nominal capacity of 435,000 barrels per day.
The line is scheduled to extend to Cushing, Okla., in late 2010 when capacity will grow to 590,000 bpd based on TransCanada’s success so far in signing contracts with shippers for 495,000 bpd for 18 years.
Keystone could provide Canada’s first link from Alberta to U.S. Gulf Coast refineries by 2012.
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