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TransCanada to Start Keystone South Deliveries to Texas Jan. 3

TransCanada Corp. (TRP) expects to begin delivering oil Jan. 3 to Texas on the southern portion of its Keystone pipeline, allowing more crude to leave a key delivery hub in Oklahoma.

TransCanada’s Gulf Coast pipeline can carry 700,000 barrels of crude a day to Port Arthur, Texas, from Cushing, Oklahoma. The Calgary-based company disclosed its plan to start service on Jan. 3 in a filing yesterday with the U.S. Federal Energy Regulatory Commission. That adds to the capacity of the Seaway pipeline owned by Enterprise Products Partners LP (EPD) and Enbridge Inc. (ENB), which now carries 400,000 barrels a day to Houston from Cushing. The operators have said they expect Seaway’s capacity to reach 850,000 in the first half of 2014.

“It’s bullish for WTI because we’re going to be pulling more barrels out of Cushing,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Once they start taking out, say 500,000 barrels a day, along with Seaway expanding, it’s going to pull crude out of Cushing a bit faster than it’s going in.”

West Texas Intermediate for January delivery on the New York Mercantile Exchange gained as much as 2.4 percent to a one-month high of $96.04 a barrel. Futures contracts are traded against crude delivered in Cushing.

WTI narrowed its discount to Brent, the European benchmark price, to as little as $16.16 from yesterday’s $17.63.

In TransCanada’s filing, the company proposes uncommitted pipeline tariffs of $10.20 a barrel ($64.16 a cubic meter) for light crude and $11.34 a barrel for heavy crude to Port Arthur, Texas, from the U.S.-Canada border near Haskett, Manitoba.

Uncommitted per-barrel rates to Cushing from the border are $6.82 for light and $7.28 for heavy.

Bottleneck Moving

“This pipeline startup enables refineries to move significant amount of crude from the Mid-continent to the Gulf Coast,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “That reinforces that the logistical bottleneck is moving from Cushing to Gulf Coast.”

Building the 700,000-barrel-a-day Gulf Coast line will cost $2.3 billion, TransCanada has said. It began construction in August 2012. After the line’s initial capacity is reached, it will be able to expand to 830,000 barrels a day, according to the company.

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

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 federal permission.

The $5.4 billion northern section can start no sooner than two years after it gets a U.S. presidential permit, which is expected early next year, Chief Executive Officer Russ Girling said Nov. 19.

To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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