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Keystone Oil Spill Probe Seen Cutting Back Pipeline Flows


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A US probe into the 13,000-barrel oil spill on TC Energy’s Keystone pipeline is expected to cut into crude flows ahead of the summer driving season.

Regulators on Tuesday ordered the company to reduce operating pressure along the entire Keystone system stretching from Hardisty, Canada, to Cushing, Oklahoma until further notice.

The new restrictions will likely force the pipeline to curb flows, according to Richard B. Kuprewicz President for Accufacts Inc, a pipeline regulatory advisor. TC Energy said in a statement while it expects to meet its contractual obligations to deliver oil, it won’t be able to accommodate spot shipments, which typically make up about 6% of flows. It wasn’t immediately clear how or if flows on the connecting Marketlink pipeline would be affected.

The new order steps up restrictions imposed on the pipeline following a 13,000-barrel oil spill in Kansas in December. Keystone had recently ramped up operating rates, with flows averaging 594,000 daily barrels so far in March compared with an average 597,000 barrels a day in November, according to Genscape data seen by Bloomberg.

Immediately prior to the spill, the company had boosted flows to nearly  650,000 barrels a day, Genscape data showed.

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Keystone had recently returned operating rates to pre-shutdown levels, with flows averaging 594,000 daily barrels so far in March, according to Genscape data seen by Bloomberg.

The pipeline, which can move as much as 640,000 barrels a day of heavy Canadian crude to the Gulf Coast, now faces a reduction in supplies just as US refiners are ramping up ahead of summer, when yearly gasoline demand tends to peak. The pipeline’s multiweek shutdown in December roiled markets, forcing refiners to scramble to make up the lost barrels.

Canadian crude prices weakened after the order with heavy Western Canadian Select’s discount to US benchmark West Texas Intermediate widening 35 cents to $15.85 in Alberta, according to data compiled by Bloomberg.

Prior to the spill, US regulators had allowed Keystone to operate at a higher pressure than other pipelines. The Pipeline and Hazardous Materials Safety Administration on Tuesday said more corrective action was needed to address the pipeline’s “repetitious pattern of failures” and the “increasing severity of spills.”

Keystone has been one of the leakiest crude pipelines in the US since 2010, spilling more than 25,000 barrels, with many of those attributed to construction deficiencies, according to government data.



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