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TransCanada almost complete with construction of southern Keystone line

10.03.2013  | 

TransCanada Corp. said it expects to finish construction of the southern portion of the Keystone XL pipeline network by the end of October. The pipeline was originally part of TransCanada’s Keystone XL project.

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By DAN MURTAUGH & ELIOT CAROOM

CALGARY (Bloomberg) -- TransCanada Corp. said it expects to finish construction of the southern portion of the Keystone XL pipeline network by the end of October.

TransCanada will begin filling its Gulf Coast pipeline with oil shortly after that, a process that’s forecast to take 30 days, Les Cherwenuk, project director for the company, said in an interview after a speech at Hart Energy’s Executive Energy Club in Houston. He declined to discuss the grades of crude that will be moved via the pipeline, though said that filling it would be easier with light, or low-density oil.

The Gulf Coast pipeline to Nederland, Texas, from Cushing, Oklahoma, is likely to speed the flow of crude out of Cushing. Cushing supplies fell to 32.8 MMbbl last week, the lowest level since February 2012, the government reported. They are down 34 % since June 28 and reached a record 51.9 MMbbl January 11.

“It’s positive for TI because there were lots of rumors going around that this could get delayed,” said Amrita Sen, chief oil analyst for Energy Aspects Ltd. in London. “That was one of the biggest factors weakening it.”

$2.3 billion project

Building the 700,000 bpd Gulf Coast line will cost $2.3 billion, TransCanada has said. It has been under construction since August 2012. After the line’s initial capacity is reached, it will be able to expand capacity to 830,000 bpd, according to the company.

Construction was split into three sections. The middle portion is already finished and the southern part should be complete in the next week, Cherwenuk said. The northernmost portion, originating at Cushing, and a terminal at Cushing, still need to be completed, he said.

The pipeline was originally part of TransCanada’s Keystone XL project, which entered its sixth year of United States review last month. President Barack Obama initially rejected the conduit in January 2012, citing concerns with its path through ecologically sensitive lands in Nebraska.

Bakken Barrels

TransCanada reapplied with a new Nebraska route last year and split the project in two, proceeding with the Gulf Coast project, the southern portion of the network that doesn’t require a permit.

Cherwenuk declined to speculate on when the company expects another decision on the northern pipeline. He said the State Department is poring over thousands of public comments and trying to address them all in an environmental impact statement.

TransCanada has agreements to ship about 100,000 bpd from the Bakken shale formation in North Dakota on the northern expansion.

TransCanada hasn’t decided what to do if the State Department approval doesn’t come through, Cherwenuk said. Building just the portion between North Dakota and Nebraska while awaiting approval doesn’t make sense because there wouldn’t be enough shipments to justify a line of the size planned, he said.

“If something were to occur, then you build a smaller pipeline, but at this point in time, just building Keystone XL based on Bakken contract supplies is not attractive,” he said.



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