The opening of TransCanada Corp.'s Gulf Coast pipeline on Wednesday is far from a panacea for land-locked Canadian oil producers, but the direct route will help more bottlenecked crude from north of the 49th parallel get to Texas and the world's largest hub of refineries.
TransCanada's $2.3-billion Gulf Coast project running from Oklahoma to Nederland, Tex., started moving crude Wednesday morning, with company officials saying the major new conduit is expected to transport an average of 520,000 barrels a day in 2014, before ramping up to 700,000 or even more than 800,000 b/d in the years ahead.
But the Gulf Coast line begins its life without its controversial northern counterpart, the Keystone XL pipeline.
TransCanada hasn't been able to yet win a U.S. presidential permit to build its Keystone XL link – which would provide a major transport link to bring crude from Hardisty, Alta., across the border to Steele City, Neb. – because of fierce American environmental opposition to increasing oil production from Canada's energy-intensive oil sands.
Keystone XL, which would also pick up some U.S. oil, would complete the Keystone system intended to provide Canadian oil with a main thoroughfare to the Gulf Coast – a refinery area with huge processing capacity, and one that Canadian oil sands producers have long sought as a way to get higher prices for their discounted product.
Growing Canadian and U.S. oil production has already created a glut at the huge crude storage hub in Cushing, Okla., resulting in lower prices for both U.S. and Canadian oil.
TransCanada chief executive officer Russ Girling said the new Gulf Coast line – which was originally simply referred to as the southern leg of Keystone, but didn't require a presidential permit – will address this issue. TransCanada rival Enbridge Inc. is also looking to bump up capacity on its Seaway oil pipeline, from Cushing to Texas, later this year.
Mr. Girling said that with production continuing to grow, crude is increasingly being shipped by rail. He said that already, a small amount, about 50,000 barrels a day, of Canadian oil has "wiggled its way" through an indirect series of routes to the Gulf Coast.
Although Mr. Girling could not say how much more Canadian oil will get to market as a result of the Gulf Coast project's opening, he said the project will transport a mix of Canadian heavy and light oil, and U.S. oil, from Cushing to refineries on the coast.
"Once connected to Keystone XL, it will move more heavy barrels. The U.S. Gulf Coast, for the most part, desires heavy barrels, not light barrels."
Mr. Girling used Wednesday's announcement to again plead his case to U.S. decision makers. He said the U.S. delay in its decision on the border-crossing Keystone XL means its $5.4-billion (U.S.) cost estimate is certain to rise, as are tolls for shippers on the line.
He shot back against critics who have said the Keystone system is just a way to send oil exports to China, saying oil flowing through the Keystone system will only displace other heavy oils being imported to the U.S. from Mexico and Venezuela.
Meanwhile, Bold Nebraska – a group fighting the Keystone XL pipeline – pledged Wednesday that Texas and Oklahoma farmers and ranchers, along with environmentalists concerned about rising greenhouse gas emissions from the oil sands, "will keep TransCanada accountable for every leak, spill and tragedy on families' land and water" along the Gulf Coast line.
However, TransCanada's Alex Pourbaix said the anti-corrosion steel pipeline is the safest the U.S. has ever seen, and "is designed to withstand the impact from 65-ton excavator with 31/2-inch-long teeth."