No timeline for Keystone crude pipeline restart as TC Energy continues cleanup

The US Pipeline and Hazardous Materials Safety Administration has not set any timeline for restart of the shutdown Keystone pipeline, spokesperson Darius Kirkwood said Dec. 13, even as the operator TC Energy continues with cleanup activities and puts more resources on the ground.

PHMSA also does not have any timeline for completing the investigation it is carrying out into the 36-inch pipeline leak, Kirkwood said in an email.

TC Energy continues with response and remediation efforts at the Keystone Pipeline System and has so far recovered 2,598 barrels of crude oil and water, it said late Dec. 12, adding vacuum trucks and multiple booms are set up downstream of the release point to contain the oil from moving downstream.

Oil has not breached the containment area and "we now have over 300 individuals on site, including third-party experts, to support containment and incident response," TC Energy said in its Dec. 12 update.

In its corrective action order issued Dec. 8, PHMSA said crude leaked following a "failure" in the Keystone pipeline nearly three miles east of Washington in Kansas.

Neither PHMSA nor TC Energy has so far divulged the cause of the leak into the Dec. 7 incident that resulted in some 14,000 barrels of crude being spilled.

WCS price reaction remains muted

Canadian crude price differentials were little changed despite the Keystone outage. Cold Lake at Hardisty, for instance, was heard trading Dec. 13 at a $29/b discount to WTI at Cushing, widening from a $26.50/b discount on Dec. 7, but remaining within a well-worn range.

Trading has been thin as the pipeline cycle is due to roll from January to February on Dec. 14.

Also, crude inventories in Western Canada remain below capacity, which could limit the impact on crude price discounts. Kpler data shows inventories currently at 28.2 million barrels, roughly 50% of storage capacity.

The 2,700-mile Keystone Pipeline System ships crude from western Canadian to refineries in Houston and in the third quarter of 2022 it moved an average 622,000 b/d.

The Canadian portion of the line runs from Hardisty, Alberta to North Dakota and through to Steele City, Nebraska, where it splits into two sections. The first runs through Missouri for deliveries to refineries into Wood River and Patoka in Illinois and the other heads south through Oklahoma to Cushing and to Port Arthur and Houston.

The second section of the pipeline system is called Marketlink, while the Port Neches Link is planned to connect the Keystone pipeline to its main crude delivery station in Nederland, Texas to allow for the delivery of crude oil to facilities at the Motiva Terminal in Port Neches.

The continued shutdown of Keystone will result in a backup in production volumes, with the Western Canadian barrels seeking a storage space in Alberta.

"Shippers are trying to determine a way forward to move crude out of Alberta," said John Zahary, CEO of Calgary-based Altex Energy, adding while initially commercial storage at Edmonton and Hardisty would be farmed out, "if it's a longer outage we would expect ramp up in rail movements."

Within a month or two, rail volumes could increase by about 100,000 b/d. But a critical path is lining up rail cars, he said.

"Given storage availability, we do not anticipate an impact on Canadian crude and condensate production, which is forecast to reach highs of 5.2 million b/d in December. This is up from lows of 4.6 million b/d in May, as turnaround recoveries combine with project ramp ups and debottlenecks, alongside conventional growth. However, given strong supply, a prolonged disruption would increase downside risks," S&P Global Commodity Insights said in a report.