TransCanada Corporation (TransCanada), on behalf of the Keystone Pipeline partnerships (Keystone) between TransCanada and ConocoPhillips, declared plans to expand the Keystone crude oil pipeline system and provide additional capacity of 500,000 barrels per day from Western Canada to the U.S. Gulf Coast in 2012.

The expansion is expected to cost approximately US$7.0 billion. When completed, the expansion will increase the commercial design of the Keystone Pipeline system from 590,000 barrels per day to approximately 1.1 million barrels per day and result in a total capital investment of approximately US$12.2 billion.

Plans to expand to the U.S. Gulf Coast follow successful negotiations with several prospective shippers who have agreed, subject to regulatory approvals, to make shipping commitments of approximately 300,000 barrels per day to the U.S. Gulf Coast for an average term of 18 years during a binding open season which begins today. In addition, prospective shippers have also agreed to commit another 35,000 barrels per day to Wood River and Patoka, Illinois during a future open season expected in the third or fourth quarter of 2008. With these commitments Keystone has now secured long-term commitments for approximately 830,000 barrels per day for an average term of 18 years. These commitments represent approximately 75 per cent 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,” says Hal Kvisle, TransCanada president and chief executive officer. “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 approximate 3,200-kilometre (1,980-mile), 36-inch crude oil pipeline 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 80-kilometre (50-mile) pipeline lateral to the Houston, Texas area. With the addition of incremental pumping facilities, the Keystone Pipeline system could be further expanded from 1.1 million barrels per day to 1.5 million barrels per day.

During the binding open season Keystone will seek additional shipping commitments from interested parties. Once Keystone completes the open season process it will proceed expeditiously with the necessary regulatory applications in Canada and the U.S. for approvals to construct and operate the proposed facilities. Construction of the facilities is anticipated to commence in 2010 following the receipt of the necessary regulatory approvals. As a result, the majority of the US$7.0 billion in additional capital investment required to expand Keystone to the U.S. Gulf Coast is expected to be made between 2010 and 2012.

Tags: ConocoPhillips, Keystone Oil Pipeline, TransCanada Corporation