NEB gives nod to Canadian expansion of Keystone pipeline
By The Canadian Press - For Business Edge
Published: 07/25/2008
The National Energy Board has approved a plan to expand the Canadian portion of the TransCanada Keystone Pipeline (TSX:TRP) project.
The $348-million expansion will allow Keystone to increase its capacity by 156,000 barrels per day to 591,000 bpd.
The Canadian portion of the Keystone pipeline will extend from Hardisty to a point near Haskett, Man.
The expansion includes seven new pump stations, increased motor sizes at seven pump stations, and the addition of pumping units at 13 previously approved pump stations.
TransCanada Corp. and ConocoPhillips (NYSE:COP) plan to extend the Keystone pipeline to the U.S. Gulf Coast - the hub of the U.S. refining industry and a coveted market for Alberta crude - and to more than double the project's capacity.
The first phase of the US$5.2-billion, 3,456-kilometre pipeline will eventually carry 590,000 barrels of crude oil per day from Hardisty to Cushing, Okla. Construction is expected to wrap up next year.
With a pricetag of $7 billion, Keystone's second phase will add 500,000 barrels per day in capacity by 2012, TransCanada and ConocoPhillips said in a statement.
The new pipeline will bring crude from the Alberta oilsands along a 3,100-kilometre route to Port Arthur, Tex., home to several key oil refineries.
The second phase increases the project's total capital budget to US$12.2 billion.
U.S. refiners have been looking to secure more stable supplies of crude as a worldwide surge in demand has pushed oil prices up 80 per cent in the last year.
The Alberta oilsands, previously an afterthought in the U.S. crude market, have become a key new source of supply even though the thick tar-like bitumen is dirtier and more difficult to refine into gasoline and diesel fuel.
U.S. refiners have been busy converting their refineries to handle the thicker Canadian crude as supplies for lighter crude continue to tighten.
Once completed, the TransCanada expansion will bring the commercial design of the Keystone Pipeline system to about 1.1 million barrels per day, with the possibility of ramping up to 1.5 million with the help of additional pumping facilities.
"The Keystone expansion will be the first direct pipeline to connect a growing and reliable supply of Canadian crude oil with the largest refining market in North America," said Trans-Canada chief executive Hal Kvisle.
FirstEnergy Capital analyst Stephen Paget called the announcement a "big victory" for TransCanada in "the race to the Gulf Coast."
He added: "I could easily see 10 to 15 bidders looking at this very seriously."
