?TransCanada Corp., Calgary, (NYSE: TRP) and ConocoPhillips, Houston, (NYSE: COP) have announced a $7-billion expansion of the Keystone oil pipeline to add 500,000 bbl. of daily capacity by 2012 from Western Canada to refineries along the Gulf Coast.
When completed, the expansion will increase the commercial design of the Keystone pipeline from 590,000 bbl. per day to about 1.1 million per day and result in a total capital investment of about $12.2 billion.


TransCanada chief executive Hal Kvisle says plans to expand follow successful negotiations with several prospective shippers who have agreed, subject to regulatory approvals, to make shipping commitments of about 300,000 bbl. per day to the Gulf Coast for an average term of 18 years during a binding open season, which began July 16.


He adds that prospective shippers have also agreed to commit another 35,000 bbl. per day to Wood River and Patoka, Ill., during an open season expected in the third or fourth quarter. With these commitments, Keystone has now secured long-term commitments for about 830,000 bbl. per day for an average term of 18 years. These commitments represent 75% of the commercial design of the system.


“The Keystone expansion will be the first direct pipeline to connect a growing and reliable supply of Canadian crude oil with the largest refining market in North America,” Kvisle says. “The Keystone pipeline will be constructed and operated as an integrated system with delivery points in the U.S. Midwest and U.S. Gulf Coast.”


The Keystone expansion includes an approximately 1,980-mile, 36-inch pipe starting at Hardisty, Alberta, and extending south to a delivery point near existing terminals in Port Arthur, Texas, and, subject to shipper support, will include an additional approximate 50-mile pipeline lateral to Houston.


Kvisle says that, with the addition of incremental pumping facilities, the Keystone system could be further expanded from 1.1 million bbl. per day to 1.5 million per day.


Once Keystone completes the open-season process, it will proceed with getting Canadian and U.S. approval to construct and operate the line.


Construction is expected to begin in 2010. As a result, the majority of the $7 billion in additional capital investment required to expand Keystone to the U.S. Gulf Coast is expected to be made between 2010 and 2012.

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