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ConocoPhillips covers oil sands bases Takes 50 percent ownership of TransCanada’s Keystone oil sands pipeline from Alberta to Oklahoma, possibly the Gulf Coast Gary Park For Petroleum News
More than two years after securing an option, ConocoPhillips has taken the final step by assuming 50 percent ownership of TransCanada’s Keystone oil sands pipeline from Alberta to Oklahoma and possibly the Gulf Coast.
In doing so, ConocoPhillips has become a full-fledged player in the oil sands, with a key role in production, transportation and refining.
Despite Keystone’s ballooning costs to US$5.2 billion from an initial $2.8 billion, ConocoPhillips sees the 590,000 barrels per day system playing a “significant role” in integrating its upstream and downstream assets and ensuring market access for growing Canadian production, Chief Executive Officer Jim Mulva said.
TransCanada Chief Executive Officer Hal Kvisle welcomed the strategic benefits of having the two companies working together to establish a “platform for developing future crude oil pipeline opportunities.”
Having ConocoPhillips as an equity partner validates TransCanada’s high-stakes gamble in reaching outside its gas pipeline comfort zone to become a carrier of oil sands production and going head-to-head with its Canadian rival, Enbridge, in the process.
There were times in mid-2005 when it seemed Enbridge and Terasen (now Kinder Morgan) might have gained an edge in locking up hundreds of thousands of barrels of production and possibly shutting out TransCanada. But strong producer support in an open season evened out the playing field.
Deliveries to start in late ‘09 Backed by a raft of regulatory approvals in Canada and the United States, Keystone is scheduled to start delivering 435,000 bpd from Alberta to the Wood River-Patoka refinery region in Illinois by late 2009, then continuing to Cushing, Okla., with 590,000 bpd by late 2010.
That 2,150 mile route is TransCanada’s early option to extend Keystone towards the Gulf Coast refineries, although it does have other alternatives to reach that ultimate prize.
For ConocoPhillips, Keystone offers access to its Wood River refinery and eventually its Borger, Texas, refinery.
Those two facilities are also part of its joint-venture partnership with EnCana, which provided ConocoPhillips with a half share in EnCana’s Foster Creek and Christina Lake oil sands production in return for giving EnCana a refinery outlet for its Alberta production, In addition, ConocoPhillips has a 9 percent stake in Syncrude Canada and a partnership with France’s Total in the Surmont oil sands project.
The largest leaseholder in the oil sands, ConocoPhillips recently disclosed its plan to achieve 1 million bpd of production from the resource over the next 20 years — surpassing the ambitions of any other player. Over that period it has hinted it may also build an upgrader in Alberta.
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