Keystone pipeline Gulf Coast expansion project, Canada and the US

20th February 2015

  

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Name and location
Keystone pipeline Gulf Coast expansion (Keystone XL) project, Canada and the US.

Client
TransCanada Corporation (TransCanada).

Project description
The Keystone XL pipeline project will enable Canadian and US oil producers to have more access to the large refining markets found in the American Midwest and along the US Gulf Coast.

The project proposes a 1 897 km, 36-inch-diameter crude oil pipeline, beginning in Hardisty, in Alberta, and extending south to Steele City, Nebraska, both in the US. This pipeline is a critical infrastructure project for the energy security of the US.

Along with transporting crude oil from Canada, the Keystone XL pipeline will also support the significant growth of crude oil production in the US from producers in the Bakken region of Montana and North Dakota.

The pipeline will have capacity to transport 830 000 bbl/d of oil to Gulf Coast and Midwest refineries, reducing American dependence on oil from Venezuela and the Middle East by up to 40%.

Value
$8-billion.

Duration
TransCanada expects to have the pipeline in service by 2015.

Latest developments
TransCanada Corp has disagreed with the US Environmental Protection Agency’s (EPA’s) recent comment that the State Department's final supplemental environmental-impact statement (FSEIS) for the project should be revisited in light of the lower oil prices.

In a letter earlier this month, the EPA suggested that, in light of the recent drop in oil prices, the State Department should revisit how big of a toll the Keystone XL pipeline would have on global warming, inferring that the slide in crude prices had created tough economic conditions for oil producers and that, in the absence of a pipeline, oil production and emissions would likely be reduced.

"TransCanada disagrees with any suggestion that the Department of State has not fully and completely assessed the environmental impacts of Keystone XL," states TransCanada president and CEO Russ Girling.

"We also reject the EPA's inference that at lower oil prices, Keystone XL will increase the rate of oil sands production and greenhouse-gas emissions (GHG). This conclusion is not supported by the conclusions drawn in the FSEIS or by actual market prices and production rates since TransCanada first applied for Keystone XL in 2008,” he adds.

The EPA letter states that "until ongoing efforts to reduce GHG emissions associated with production of oil sands are more successful and widespread, the FSEIS makes clear that, compared with reference crudes, development of the oil sands crude represents a significant increase in GHG emissions".

TransCanada has advised that a more meaningful comparison will be the heavy crude oils from Mexico, Venezuela and Saudi Arabia that the Keystone conduit will actually displace, rather than a comparison with a basket of 'reference crudes' that include predominantly light, low-GHG crudes. The oil that will flow through the pipeline to Gulf Coast refineries will be from the light oil plays, in the US Bakken, and also heavy oil from the Canadian oil sands.

The EPA also claims that the FSEIS concludes that the construction of Keystone XL could change the economics of oil sands development and result in increased production and GHGs if oil prices remain low.

However, TransCanada argues that this statement does not accurately reflect what the State Department has concluded, namely, that "the dominant drivers of oil sands development are more global than any single infrastructure project. Oil sands production and investment could slow or accelerate depending on oil price trends, regulations and technological developments, but the potential effects of those factors on the industry's rate of expansion should not be conflated with the more limited effects of individual pipelines".

According to TransCanada, oil output in Canada and the US is forecast to continue growing and much of the growing output is being transported by more expensive rail transport.

Rail loading capacity in Western Canada is projected to increase from 200 000 bbl/d in 2013 to about one-million barrels a day by the end of this year. In the US, Bakken rail crude transport rose from 200 000 bbl/d in 2008 to 800 000 bbl/d in 2014.

TransCanada says short- and medium-term fluctuations in oil prices do not significantly impact whether the oil sands will be developed. When TransCanada filed its initial presidential permit application for the project in 2008, oil prices were in the $40/bl range. Since then, prices have ranged "well above and below $100/bl".

"Even with price volatility, oil has been making its way to market. Oil sands and US Bakken production are both up by one-million barrels a day since 2008. So it is clear that building or not building Keystone XL will not cause production to go up or down nor does the pipeline significantly exacerbate the problem of GHG emissions,” Girling concludes.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
Keystone XL has been delayed, owing to the rejection of TransCanada’s application for a permit to build and operate the project.

Contact Details for Project Information
TransCanada, tel +1 866 717 7473 or email keystone@transcanada.com.

Edited by Creamer Media Reporter

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