December 16, 2009 at 11:31 am #2838
Keystone line fill boosts heavy crude demand
Houston, 14 December (Argus) The impending start to line fill of TransCanada’s 435,000 b/d Keystone pipeline is driving up differentials for heavy Canadian crude and the diluent used to help move the product through pipelines.
After some uncertainty about the start date of line fill, market participants are now securing January heavy crude volumes to ship on the system or alternative supplies in lieu of those injected into Keystone.
The increased demand has recent deals for Western Canadian Select (WCS), the benchmark Canadian heavy crude stream, trading around a $9/bl discount to West Texas Intermediate (WTI), its narrowest differential since May, according to Argus pricing. On a percentage basis, for the week ended 11 December, WCS differentials ended at a nearly 13pc discount to WTI, the closest it has drawn to the US benchmark all year.
So far this year, WCS has averaged a 15.6pc discount to WTI.
Line fill and colder weather is also causing Canadian Condensate the primary diluent used to help reduce the viscosity of bitumen and heavy oil to enable pipeline transportation to trade stronger relative to WTI, according to traders. Recent deals for January Condensate were around a $4.32/bl premium to WTI, the strongest level seen all year.
Several sellers have been holding diluent in storage because they are were unhappy with the prices they were receiving but, with demand and differentials strengthening, an increasing amount is making its way into the market, traders said. At these numbers they can justify the withdrawal, one market participant said.
TransCanada is on track to start line fill before the end of the year, company spokeswoman Cecily Dobson told Argus. TransCanada has received regulatory approval to operate the pipeline, but the pump stations are still under assessment, according to Paul Lackhoff, a spokesman for Canada’s National Energy Board (NEB).
TransCanada has said it expects to operate the system at 220,000 b/d for the majority of next year under an interim contract agreement as it works through operational and commission issues.
Keystone will take approximately 9mn bl out of the market before first crude gets delivered to Wood River and Patoka, Illinois, by the end of next year’s first quarter, according to TransCanada. Two-thirds of the system’s shipments will consist of heavy crudes, while one-third will consist of light oil, market participants said.
The drive to secure heavy crude has caused storage levels in tanks at Hardisty, Alberta which is Keystone’s starting point to fall below forecasts as heavy crude output is not keeping up with the demands to fill the system as well as commitments to ship on other Hardisty-based pipelines, such as Enbridge’s 1.9mn b/d mainline system, traders said. As a result, some shippers have been asked to delay their crude shipments until production recoups, according to one market source.
Keystone is pulling hard at the heavy bl, one trader said.
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December 16, 2009 at 11:40 am #5883
Here is update from Argus on TransCanada Keystone P/L and its first shipments of Heavy Canadian Crude.
The linefill is driving up differentials for Heavy Crude & diluent used for blends but the 220 MBD (2/3 hvy crude & 1/3 light oils) the P/L is expected to operate at will give some relief on refineries bearing brunt of decrease in Maya & Venezuelan heavy crudes. Some shippers may wait for demand & refinery production to recover to normal levels & the prices for Canadian Condensate diluten to improve.
One first deliveries will be for Woodriver – WRN Refinery one the two joint venture refineries for Heavy Canadian Crude between EnCana/COP that recent completed coker additions at both Woodriver & Borger & have expansion plans for an additional coker addition.
March 1, 2010 at 8:55 am #5756
Argus: TransCanada confirms Keystone line fill delayed
Houston, 23 February (Argus) TransCanada has officially extended the timeline for the start of commercial operations on its 435,000 b/d Keystone pipeline to mid-2010 from the first quarter as a result of the delayed line fill of the system, the company said today.
Keystone line fill will commence in the next week or two, TransCanada’s president of pipelines Russell Girling said today during the company’s earnings conference call.
TransCanada’s comments affirm what traders have suspected for months that filling the system had been pushed back. But until today, the company repeatedly told Argus that line fill began in December and was expected to be done by the end of March. Those comments came despite the fact that Canada’s National Energy Board (NEB) only approved Keystone’s pump stations on 19 January, a move that finally would allow crude to begin flowing on the system.
As recently as mid-January, TransCanada spokeswoman Cecily Dobson said, Line fill commenced in December 2009. We are accumulating oil and will continue through the first quarter of 2010. Around the same time, Marathon Oil’s vice-president of supply, distribution and planning for the downstream segment, told Argus he did not expect Keystone line fill to begin until mid-March.
After the NEB approved pump stations last month, TransCanada was required to provide shippers with 60 days notice that line fill volumes were required, according to several sources. This pushed line fill back, they said.
We are probably six to eight weeks outside of where we thought we were in the fourth quarter, Girling said today, dismissing the delay as immaterial. He called the longer timeframe for Keystone’s start the result of regulatory, permitting and start-up issues.
The company currently has 1mn bl of crude in storage, and expects to put 9mn bl of crude in the system over the next 100 days. Line fill is expected to be complete by the end of June, and full commercial operations will start before the end of the year, Girling said. Once in service, the system is expected to operate at a capacity of 217,500 b/d for the remainder of 2010, with the potential to move additional spot volumes, TransCanada chief executive Hal Kvisle said.
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March 24, 2010 at 11:04 am #5717
by Edward Welsch Dow Jones Newswires
March 23, 2010
OTTAWA (Dow Jones)
Canadian producers of crude from oil sands are making a big push into the U.S. Gulf Coast market, where refiners are paying the highest prices in decades for low quality, high-sulfur oil.
Historically, Canadian high-sulfur, or “heavy,” crude, shipped by long-distance pipeline, has struggled to compete against cheaper, seaborne shipments of oil from Mexico, Saudi Arabia and Venezuela. But Mexico’s heavy-crude output is declining and Venezuelan exports of the stuff to the U.S. have dropped amid a rocky political relationship between the two nations. Saudi Arabia, meanwhile, has also cut exports of high-sulfur crude, which is less profitable than lighter varieties, as part of broader cuts by the Organization of Petroleum Exporting Countries.
Reduced competition and higher prices for Canadian crude come at a good time for Alberta’s oil-sands industry, which is expected to double within the next 10 years to 3.1 million barrels a day and requires new markets to soak up the growing output. While Canada supplies a quarter of U.S. oil imports, only 2.2% of the crude refined in the Gulf Coast region–which has the lion’s share of U.S. heavy-crude refining capacity–came from north of the border last year.
“We think there’s an opportunity for Canadian companies to gain more market share in the Gulf market,” said Alberta Energy Department Assistant Deputy Minister Mike Ekelund, who is in charge of the province’s resource strategy. “We’re a supplier that’s right next door, we’re relatively politically stable, and we think there’s a great deal of benefit for Americans in terms of having a secure access to supply.”
Mexico’s heavy crude oil is in decline due to waning production from its giant Cantarell offshore field in the Gulf of Mexico, and U.S. exports declined to 1.24 million barrels per day last year, down 28% from their peak in 2006.
In Venezuela, production has been in decline due to political instability and lack of new investment. President Hugo Chavez has also begun to send a fraction of his country’s crude exports away from the U.S. to the Chinese market, and has cut exports in recent months to meet OPEC mandates. Imports from Venezuela have dropped to under 900,000 barrels a day in recent months, cut in half from peak rates during the 1990s and down a quarter from 2008.
Meanwhile, other OPEC exporters, mandated to cut production to keep prices high amid lower world demand, have cut production of less-profitable heavy crude first. Saudi Arabia reduced imports to the U.S. to under 1 million barrels per day, down a third from 2008, with most of the reduction in heavy crude.
As the Gulf Coast’s regular supplies of heavy crude oil have declined, the price for it has shot up, as Gulf refiners–heavily invested in the heavy-oil cokers used to break the stuff into lighter grades–are willing to pay more to keep their facilities running.
Canadian Natural Resources Inc. (CNQ), a large Canadian oil and gas company with significant production of heavy crude from the oil sands region, said the Canadian heavy oil discount to West Texas Intermediate crude dropped to an average of 16% during the fourth quarter.
“Historically the heavy oil differentials have been in that 30% to 45% range, averaging about 32%,” Canadian Natural President Steve Laut said during the company’s fourth-quarter conference call earlier this month. “We think that has structurally changed and right now, as you know, Canadian heavy crude differentials are probably in that 10% range, very low.”
Laut said high heavy crude prices were likely to drop a bit, but Canadian heavy crude would likely trade at a discount of 22% to 24% for the foreseeable future.
As a result, Wall Street analysts have begun rewarding Canadian companies that are slanted toward heavy-crude production. Analysts at Goldman Sachs, Morgan Stanley, Credit Suisse, Raymond James, Scotia Capital, BMO Capital Markets, and Canaccord Adams have all upgraded Canadian Natural to buy-equivalent ratings this year.
Canada’s government is aiming to help heavy-oil producers expand in the U.S. Gulf market, too. Earlier this month, Canada’s national energy regulator approved the construction of TransCanada Corp.’s (TRP) Keystone XL pipeline, which is designed to eventually bring 900,000 barrels of oil a day from Alberta to the Gulf, and is the first of several major pipeline projects aimed at taking Canadian crude further south.
June 9, 2010 at 12:14 pm #5577
Keystone pipeline operating in Kansas, Missouri
The Associated Press . June 9, 2010
ST. JOSEPH, Mo. (AP) – Eight million gallons of oil are flowing through the Keystone pipeline in Kansas and Missouri, and more is expected later this month.
TransCanada is installing the 1,073-mile pipeline from Alberta, Canada, to a Wood River, Ill., refinery.
The St. Joseph News-Press reports that a TransCanada spokesman said Tuesday that the 8 million gallons have already reached Missouri. The company hopes to eventually move 435,000 barrels of oil through the pipeline every day.
The Keystone pipeline cuts through Buchanan, Clinton and Caldwell counties in Missouri and Nemaha, Brown and Doniphan counties in Kansas. Another phase is being constructed from Nebraska to Oklahoma, with eventual expansion planned to the Gulf Coast.
July 1, 2010 at 12:59 pm #5557
Alberta, June 30 (Reuters)
– TransCanada Corp’s (TRP.TO) $5 billion Keystone pipeline began operating on Wednesday, delivering 435,000 barrels per day of Canadian oil sands crude to Illinois refiners.
TransCanada, the country’s No. 1 pipeline company, said it has completed filling the Keystone line with oil and is making commercial deliveries to U.S. Midwest refineries, two years after construction began.
The new line is just the first phase of a $12 billion program to increase market access for oil sands crude in the United States. TransCanada has already begun work on extending Keystone with a branch running from Steele City, Nebraska, to Cushing, Oklahoma, which will boost capacity to 591,000 barrels a day next year.
The company is also in the planning stages of its $7 billion Keystone XL line, which will carry 510,000 bpd from Hardisty, Alberta, to the U.S. Gulf Coast refining hub. Construction of the line is expected to be complete in 2013.
Enbridge Inc (ENB.TO), Canada’s No. 2 pipeline company, is also expanding its system to carry more Canadian crude to U.S. Midwest. Its 450,000 bpd Alberta Clipper pipeline is currently being filled with oil and should be in service by the end of September.
Reporting by Scott Haggett
Editing by Peter Galloway
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