TransCanada Keystone South Won’t Deliver Oil Before Mid-January

TransCanada Corp. (TRP) told shippers the Gulf Coast portion of its Keystone pipeline won’t be in service before mid-January, three days after it said in a letter to regulators that it anticipated beginning service on Jan. 3.

The Calgary-based pipeline company estimates it will begin taking receipts and delivering oil in mid- to late January, a bulletin to shippers shows. Customers will receive a letter about 30 days before service begins.

The pipeline section has the capacity to carry 700,000 barrels of crude a day from Cushing, Oklahoma, the delivery point for West Texas Intermediate futures on the New York Mercantile Exchange, to Port Arthur, Texas.

TransCanada said in a Dec. 2 letter to the U.S. Federal Energy Regulatory Commission that it expected to begin service to Port Arthur on Jan. 3.

The company’s bulletin yesterday was “clarification to our customers as a result of some of the media stories that were published, and again -- what we have said in this bulletin is consistent with what we have told them previously,” Shawn Howard, a TransCanada spokesman, said by e-mail.

“There are many moving parts to this process -- completion of construction, testing, regulatory approvals, line fill and then the transition to operations,” he said.

Oil Glut

TransCanada’s Keystone line to the Gulf is part of a reversal of decades-old shipping routes that is shifting crude from the center of the country to the coasts as domestic production rises to the highest level in almost 25 years. Supplies at Cushing reached a record 51.9 million barrels in January. They are now at 40.6 million barrels, 23 percent above the five-year average, data compiled by Bloomberg show.

The glut helped push WTI prices to an all-time low of $27.88 a barrel below international crude benchmark Brent in October 2011. U.S. oil’s discount has averaged $10.56 this year.

West Texas Intermediate for January delivery gained 18 cents a barrel to settle at $97.38 yesterday on the New York Mercantile Exchange. It closed at a $13.60 discount to Brent.

TransCanada’s Gulf Coast line will cost $2.3 billion and its capacity could later be expanded to 830,000 barrels a day, according to the company. Flows will average 520,000 barrels a day for its first year in service, Howard said on Dec. 3. It began construction in August 2012.

Keystone XL

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 rejected that plan 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 southern portion to the Gulf Coast, which doesn’t require federal permission.

In TransCanada’s filing, the company proposed 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.

Shipments on just the Cushing-to-Port Arthur segment, which TransCanada refers to as Marketlink, will cost $3.48 a barrel for light oil and $4.18 for heavy.

The $5.4 billion northern section can be built at the earliest 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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