A two-phase approach to the Keystone XL oil pipeline from Canada to U.S. Gulf Coast refineries should result in a new line from Oklahoma to the Gulf being in place sometime next year, with the XL phase from Canada to Nebraska following by early 2015, the CEO of the project's sponsor, TransCanada Corp., said Friday. The latter is the only part of the project now requiring a federal Presidential Permit from the U.S. State Department.
Reiterating that he feels the Gulf Coast Project from Cushing, OK, to refineries in Texas and Louisiana has "stand-alone" value, TransCanada CEO Russ Girling told shareholders at an annual meeting and financial analysts on a conference call that the project will be pursued as an independent, $2.3 billion, 36-inch diameter oil pipeline, separate from the import portion of the project.
"Subject to certain regulatory approvals, we anticipate the Gulf Coast project to be in service in mid- to late 2013," said Girling in reporting decreased quarter-over-quarter earnings for 1Q2012. Part of the project's $300 million cost will pay for a 47-mile Houston lateral that is a key for producers in the north, who face significant barriers and added costs to get their production to the Gulf, he said.
"U.S. crude production has been growing significantly in states like North Dakota, Montana, Oklahoma and Texas, and those producers do not have access to enough pipeline capacity to move their production to the larger refining markets," Girling said. "The Gulf Coast Project is designed to remove that constraint and also allow refineries to access lower-priced domestic crude production and avoid paying the significant premium they are paying for world-priced oil from foreign producers."
Girling said that he expects the Gulf Coast line to be under construction in late summer this year.
Girling predicted that TransCanada will be re-applying "very shortly" for a U.S. Presidential Permit for the remaining Keystone XL project with ultimately a new route in Nebraska around its environmentally sensitive Sandhill region.
Given three years of past environmental review on the original Keystone XL project, which was rejected by the Obama administration in January (see Shale Daily, Jan. 19), Girling thinks the revised XL application should be processed quickly by the Obama administration.
"If a Presidential Permit is granted [in spring next year], we would expect that Keystone XL pipeline will be operational in late 2014 or early 2015," Girling said."The cost of that project is estimated at $5.3 billion, unchanged at where we were before."
Girling said that TransCanada has already spent about $2.3 billion of the estimated $7.8 billion for the original 1,700-mile U.S. portion of the project that now is split into two separate programs. About $1.5 billion of that total is for the XL phase.