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Keystone pipeline 'limited' in delivering spot crude volumes, says TC Energy


94% of contracted volumes being delivered

Port Neches crude link to be in service in Q1

Coastal GasLink pipeline is 84% complete

  • Author
  • Ashok Dutta
  • Editor
  • Ankit Rathore
  • Commodity
  • LNG Natural Gas Oil

The Keystone crude oil system is 'limited' in delivering spot volumes to its customers in the US Midwest and the Gulf Coast, as pressure restrictions still remain in place in the aftermath of the December pipeline leak, a senior TC Energy official said Feb. 14.

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The pipeline is operational at all delivery points. However, it is being run in line with the US Pipeline and Hazardous Materials Safety Administration's "corrective action order" and under some additional mitigating measures, which include a "de-pressured, de-rate" system as required by the regulator, President of Liquids Pipelines Richard Prior said on the company's earnings call.

"Commercially, we are able to deliver all of our contracted volume requirements," Prior said. "But we are limited in our ability to move uncommitted or spot volumes. Keystone is 94% contracted, and we are required to leave 6% of our space for uncommitted or spot capacity by the regulators," he said.

TC Energy did not give details during the call on the volume of crude the pipeline shipped in the fourth quarter of 2022. However, in November the company said the average volume shipped in the Q3 2021 was 622,000 b/d.

Return to full capacity

Prior did not indicate a timeline on when Keystone would return to its 100% capacity, stating TC Energy's current focus is on remedial actions and safe operations of the pipeline system while simultaneously working with PHMSA and state-level agencies on determining the factors that led to the incident.

In early December, TC Energy reported a leak in the Keystone pipeline in Kansas, which resulted in the spilling of about 14,000 barrels.

"It will take some time for the root cause investigation to play out and for us to determine what caused the failure. It is at that time we will ask PHMSA's permission to return to baseline operations, and right now I don't have a timeframe at this point in time," Prior said.

So far, TC Energy has recovered 90% of the oil, and the results of the metallurgical lab analysis highlighted that the failure was a result of the weld flaw and bending stress, Prior said, adding that "They both had to be present in order for the failure to occur."

Importantly, the analysis also did confirm that there were no issues with the pipe or material properties, adding that the system was operating well within its designed permit at the time of the incident.

The evidence is suggesting this is a localized issue but "we [are] still taking a system approach to assessing risk and our engineers are actively evaluating across the Keystone system," Prior added.

Port Neches start up

With over 800 "people" still on the remedial job, TC Energy is targeting to complete the Port Neches Link for its Keystone system in Q1 2023, CEO Francois Poirier said on the same call.

"This link provides the last-mile connectivity to North America's largest refinery [operated by Motiva Enterprises of capacity 630,000 b/d]," Poirier said.

The 2,700-mile Keystone Pipeline System ships crude from western Canadian to refineries in the US Midwest and the Gulf Coast.

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 while 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 designed 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.

Full steam ahead for Canadian gas pipeline

Meanwhile, TC Energy has completed nearly 84% work on the Coastal GasLink pipeline project in Western Canada, the company said in its earning statement.

The entire route has been cleared, grading is more than 96% complete and more than 510 km (326-mile) of the pipeline has been welded, lowered and backfilled with restoration activities underway in many areas, it said.

The project has faced material cost pressures that reflect challenging conditions in the Western Canadian labor market, shortages of skilled labor, impacts of contractor underperformance and disputes, as well as other unexpected events, including drought conditions and erosion and sediment control challenges.

The pipeline is targeted for mechanical completion by end-2023, with commissioning and restoration work continuing into 2024 and 2025, TC Energy said.

The Coastal GasLink pipeline is the main infrastructure to supply feedstock from the Western Canadian Sedimentary Basin to the Canadian Pacific Coast for the planned Shell-led LNG Canada plant under construction at Kitimat in British Columbia.

The initial cost of the pipeline was C$6.6 ($5 billion), but then it increased to C$11.5 billion and now is estimated to be C$14.5 billion, Ian Archer, a gas analyst with S&P Global Commodity Insights, said separately Feb. 14.

TC Energy also stated that costs may rise an additional $1.2 billion if it experiences more delays to construction, Archer said.

Although the initial capacity of the pipeline is around 2.1 Bcf/d, it is expandable to 5 Bcf/d if TC Energy adds additional compression facilities.

The LNG Canada plant has a nameplate capacity of 18 million mt/y, and the first train is due for start-up in late 2025, Archer added.