TransCanada considers early start on southern leg of Keystone pipeline

TransCanada considers early start on southern leg of Keystone pipeline:

'via Blog this'


TransCanada Corp. CEO Russ Girling said his company is considering splitting up Keystone XL into different phases to build a southern segment first, following Wednesday’s rejection by U.S. authorities of the $7-billion project.
Photograph by: Andrew Harrer, Bloomberg
CALGARY — TransCanada Corp. is mulling whether to separate its proposed Keystone XL oil pipeline into segments and build one leg from Oklahoma to the Gulf Coast first, following a U.S. rejection of the $7-billion project.

Chief executive Russ Girling said Thursday that laying pipe from an oversupplied oil storage hub in Cushing, Okla., to refining centres in Texas would cost TransCanada $2 billion.

"I think that clearly, with yesterday's decision, we are now open to amending or changing our plans to building this in segments," Girling told an investor conference in Whistler, B.C.

"As we've said before, that's dependent on the interest of our shippers in doing that," he said.

A TransCanada pipeline from Cushing to the Gulf Coast would compete directly with the Seaway pipeline reversal proposed by rival Enbridge Inc. and its partner Enterprise Products Partners LP, scheduled to start on June 1, Enbridge CEO Pat Daniel said at the same conference.

The Seaway line would transport up to 450,000 barrels per day by the end of the year, Daniel said, noting the companies are in the midst of gauging shipper support to expand capacity on the line.

Gulf Coast refiners are keen to replace declining supplies of international oil with Canadian and U.S. volumes and a glut in supply at Cushing has had North American crudes trading at a discount to the international benchmark Brent for more than a year.

U.S. President Barack Obama breathed life into the southern route after rejecting Keystone XL Wednesday, when he said his administration would work with the oil and gas industry "including the potential development of an oil pipeline from Cushing, Okla. to the Gulf of Mexico."

TransCanada had floated the idea of building a leg from Cushing to Texas last November when the U.S. State Department delayed its decision from the end of 2011 to the first quarter of 2013, saying it required additional study on alternative pipeline routes through Nebraska. But the company later said it was sticking to its plan to get the entire 2,700-kilometre Alberta-to-Texas pipeline approved as one project.

Wednesday's denial of Keystone XL by Obama, who said Republicans forced his hand with a requirement in December to decide on the cross-border pipeline within 60 days, has changed the game.

Girling said TransCanada is proceeding "cautiously" with the idea to build the southern portion of the 830,000 barrel-per-day line first, and that the company plans to re-apply for approval of Keystone XL with the State Department. Girling still expects Keystone XL approval in early 2013 and that the pipeline would start operating late in 2014.

TransCanada is currently working with officials in Nebraska on a detour of the line around the ecologically sensitive Sand Hills region, which contains a vast aquifer, he said.

The U.S. presidential denial doesn't affect its agreements with oil producers and refining companies contracted to ship on Keystone XL, he said.

"They're still contractually committed to the process."

Valero Energy Corp. has 1,600 workers currently expanding its Port Arthur, Texas refinery, which plans to replace declining volumes of heavy oil from Mexico and South America with Canadian crude, and remains committed, spokesman Bill Day said.

"Valero remains in support of the Keystone XL project," Day said.

rpenty@calgaryherald.com

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