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TransCanada moves ahead with Keystone
Gary Park For Petroleum News
TransCanada’s resolve to reach outside its natural gas pipeline role and become a serious shipper of heavy oil to the United States seems beyond question now that it has filed an application with the National Energy Board to build the Canadian portion of its Keystone project.
The filing seeks approval to build and operate new facilities including about 220 miles of new pipeline, terminal facilities at Hardisty, Alberta, and pump stations.
The application also covers approval of tolls and the tariff for the pipeline.
The estimated capital cost of the Canadian segment is C$664 million.
In June, TransCanada and its Keystone subsidiary applied to the board to convert a portion of its mainline natural gas transmission facilities for use as part of Keystone.
Public hearings on that contentious issue were completed in mid-November and a decision is expected early in 2007.
Overall project pegged at US$2.1B The overall project costing an estimated US$2.1 billion involves 1,800 miles of pipeline from Alberta to US Midwest markets at Wood River and Patoka, Ill.
The schedule calls for deliveries to start in 2009 at 435,000 barrels per day, although the pipeline could be expanded to 591,000 bpd.
To date, Keystone has firm, long-term shipping commitments for 340,000 bpd for an average term of 18 years, with support from ConocoPhillips (which is poised to take an equity stake), Suncor Energy and Canadian Natural Resources.
TransCanada Chief Executive Officer Hal Kvisle said the crude oil pipeline capacity out of the Western Canada Sedimentary Basin is tight and as oil sands production grows it will “become increasingly constrained.”
The project puts TransCanada head-to-head with its Canadian pipeline rival Enbridge which is pushing ahead with major expansions and additions to its long-established delivery systems to the U.S.
Line reversals, new projects Calgary-based investment dealer Peters & Co. said in a new report that the flurry of line reversals and fresh projects is having a “lasting impact’ on North American oil markets.
The result is “fundamental shifts in the pricing of heavy oil in North America” as access is opened up to new markets and refinery expansions to process greater volumes of heavy crude.”
The firm said heavy oil is gaining prominence as a feedstock for refineries partly because of higher margins and rising oil sands supplies.
But until the New York Mercantile Exchange introduces a formalized futures contract for a grade of crude called Western Canadian Select, producers are required to hedge output against volatile price differentials that Peters estimated were about 50 percent of the benchmark light crude price last winter.
It said the discounts are currently hovering around 35 percent, the lowest margin since 2003.
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