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Oil-Sands Output Returning as TransCanada Restores Gas

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Oct. 18 (Bloomberg) -- TransCanada Corp. resumed natural gas deliveries in Alberta following a pipeline rupture, allowing oil sands upgraders to ramp up production after reducing rates yesterday.

TransCanada’s North Central Corridor system is delivering gas to all but two customers after isolating a pipe break, the Calgary-based company said today. The 36-inch (91-centimeter) line with a sleeve and needs a section cut out and replaced, according to Canada’s National Energy Board.

Canadian Natural Resources Ltd.’s Horizon upgrader is increasing to full capacity and Imperial Oil Ltd.’s Kearl oil-sands project is returning to normal rates after halting output yesterday when fuel supply was cut off, the companies said in e-mailed statements today.

“If the outage is short-lived and people ramp up quickly, then the effect in the oil market is going to be small given that crude differentials had become weak in Canada, indicating a significant amount of supply there,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Western Canadian Select was unchanged at a $29-a-barrel discount to benchmark West Texas Intermediate, according to Calgary oil broker Net Energy Inc. Syncrude was unchanged at $9.50 a barrel less than WTI.

Reduced Supply

As much as 920,000 barrels a day of supply from Alberta’s oil-sands region was affected by yesterday’s outage. In addition to the Imperial and Canadian Natural sites, the Syncrude oil-sands upgrader and Suncor Energy Inc.’s Fort McMurray plant also cut output.

The 350,000-barrels-a-day Syncrude upgrader will ramp up to normal rates over the weekend, according to a person familiar with the matter. Suncor is returning to normal operations at its 350,000-barrels-a-day Fort McMurray upgrader, Kelli Stevens, a company spokeswoman, said by e-mail.

Pembina Pipeline Corp. said it resumed normal operations after some of its oil pipeline operations in the area were shut or slowed yesterday.

“Stocks are fairly high, so unless it’s a prolonged shutdown it’s not going to impact flows into the U.S.,” Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London, said by telephone.

Leak Detected

TransCanada detected a pressure drop on a section of its North Central Corridor system at about 2:50 a.m. local time yesterday, according to an e-mailed statement. The company is still investigating the cause of the line break.

While TransCanada has resumed service on a 24-inch gas pipeline that’s part of the corridor system, the 36-inch line that ruptured remains shut, Rebecca Taylor, a spokeswoman for the NEB, said by telephone yesterday. The line will remain out of service until the board approves it to restart, said Taylor, who didn’t immediately know how many customers the pipe serves.

Alberta electricity posted pool prices spiked to C$696.50 per megawatt hour at 10 a.m. local time yesterday, before falling to more normal levels of C$28.82/mWh by noon, according to Genscape data compiled by Bloomberg.

“We have experienced no reliability issues on Alberta’s electricity grid as a result of this incident that occurred,” Alberta Electric System Operator spokeswoman Dawn Delaney said in a voice mail message. “We did see an increase in prices for a period of time, but the key here is from a reliability perspective we don’t have any further concerns.”

To contact the reporters on this story: Eliot Caroom in New York at ecaroom@bloomberg.net; Edward Welsch in Calgary at ewelsch1@bloomberg.net

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

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