TransCanada to move ahead with Gulf Coast leg of Keystone XL pipeline
By EDWARD WELSCH
TransCanada said Monday it will move ahead with the Gulf Coast leg of its controversial Keystone XL pipeline while a new application for the whole pipeline is being reviewed by the US government.
The 435-mile leg from the key US storage hub of Cushing, Okla., to refineries in Texas will cost $2.3 billion to build, can transport 700,000 bpd of oil, and could be completed by the middle of next year, the Calgary pipeline company said.
The move comes as a glut of crude oil is building up in the US Midwest due to surging production from the western US and Canada, with no route to refineries on the US Gulf Coast that take in overseas imports.
The oversupply is depressing US oil prices below the international price by about $15/bbl, even as US prices rose above $109/bbl Monday.
Pipeline routes to the US Gulf Coast from the Midwest would allow oil producers to sell at higher prices, and would replace some oil coming into the US from overseas producers like Saudi Arabia, Venezuela and Mexico.
"The Gulf Coast Project will transport growing supplies of US crude oil to meet refinery demand in Texas," TransCanada CEO Russ Girling said in a release.
"Gulf Coast refineries can then access lower-cost domestic production and avoid paying a premium to foreign oil producers. This would reduce the United States' dependence on foreign crude and allow Americans to use more of the crude oil produced in their own country."
The Gulf Coast leg was originally part of the 1,700-mile Keystone XL oil pipeline project, which was rejected by the US government early this year due to concerns about the pipeline's route through an environmentally sensitive area in Nebraska.
TransCanada is re-applying for a cross-border permit for the larger project connecting the western Canadian province of Alberta to Texas.
It's expected to cost $7 billion and would deliver up to 1.1 million bpd of oil by the time it's complete in early 2015.
Other pipeline companies are also planning pipelines connecting the Gulf Coast and Cushing.
Rival Canadian pipeline company Enbridge last year bought a 50% stake in the Seaway pipeline. Enbridge plans to reverse Seaway's flow, sending 150,000 bpd of oil a day southward by the middle of this year, and to expand it to 500,000 bpd by next year.
Dow Jones Newswires
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