TransCanada Corp said on Wednesday it could start building the portion of its planned Keystone XL pipeline that runs from Cushing, Oklahoma, to the Gulf of Mexico, even as it awaits U.S. approval for the project as a whole.
The company said its customers are eager for a way to move oil from the glutted Cushing storage hub to the Gulf Coast, where refineries are paying a premium for crude.
TransCanada was able to offer few details on the potential plan and has not yet revealed the costs or how much crude the line would take from the Cushing hub.
It's way too early in the process to speculate on those things, Russ Girling, TransCanada's chief executive, told reporters. We have not sat down with our shippers, we have not sat down with our regulator ... We haven't commenced those conversations.
While it has secured many of the of the required regulatory approvals and rights-of-way for the Gulf leg of the controversial project, TransCanada said it will not go ahead without the blessing of the U.S. State Department, which has delayed its approval for the full project to late 2012 or early 2013.
In delaying its decision last week, the State Department asked that the line's path through Nebraska be moved away from environmentally sensitive areas.
The full Keystone XL pipeline would transport crude from the northern Alberta oil sands to the Gulf Coast. But should it decide to go ahead with the southern leg of the line, TransCanada could move quickly to get work started.
We would be in position to commence construction on (the Cushing to Gulf Coast) portion of the line literally very early in the new year, in January, Alex Pourbaix, president of TransCanada's pipeline division, said at a company presentation to analysts.
We are taking a look at the regulatory side of that. At the worst, we would require the permission of the State Department to proceed ... but we think that is something that is definitely doable.
TransCanada had expected the State Department to approve the entire $7 billion project to ship oil sands crude to Texas before the end of the year. However, it is now looking for alternatives after the delay imposed by the Obama administration.
The southern portion of Keystone XL, including a $600 million lateral line from Keystone's southern terminus to Houston, would carry up to 830,000 barrels of crude a day to the largest refining hub in the United States, including 150,000 barrels sourced from Cushing.
A glut of Canadian oil at the Cushing hub, the pricing point for the West Texas Intermediate benchmark, has depressed North American oil prices. Oil producers are looking to Keystone XL to help relieve bloated storage levels at the hub.
However an alternative to the Keystone XL line emerged on Wednesday as Enbridge Inc said it would pay $1.15 billion for ConocoPhillips' stake in the Seaway pipeline, which takes Gulf crude to Cushing. Enbridge said it would reverse Seaway's flow, taking 150,000 bpd from Cushing by the middle of 2102 and 400,000 bpd by early 2013.
TransCanada's Pourbaix said the reversal was not a threat to his company's plans, since rising oil sands production and increasing output from shale oil fields such as the Bakken in North Dakota will require additional pipeline capacity.
There's enough oil at Cushing for both us and Enbridge, he said.
TransCanada shares were up 19 Canadian cents at $40.97 on Wednesday afternoon on the Toronto Stock Exchange. Enbridge was also up 19 Canadian cents at C$35.01
(Editing by Peter Galloway)