TC Energy shuts down Keystone pipeline system after leak in Kansas

CALGARY –

The dimension and scope of the oil spill attributable to the Keystone pipeline Wednesday stays unknown, however analysts say Canadian crude may endure a major value impression if the pipeline is shut down for various days.

Pipeline operator TC Energy Corp. stated Wednesday night that it had mobilized individuals and gear in response to a confirmed launch of oil right into a creek in Washington County, Kan., about 32 kilometres south of Steele City, Neb.

The system remained shut down Thursday morning, as crews reply and work to comprise and get better the oil that was spilled.

TC Energy has not indicated how a lot oil was spilled, or how lengthy the pipeline system is predicted to be down.

h ceeIt stated the affected section of the pipeline has been remoted and booms have been deployed to stop the leaked oil from shifting downstream.

But analysts say any extended shutdown can be problematic, as a result of oil from Western Canada has already been buying and selling at a major low cost to international costs up to now this season.

On Thursday, for instance, the differential between Western Canada Select and the U.S. benchmark West Texas Intermediate was about US$29 per barrel (a US$15 unfold is extra typical).

The distinction in value in 2022 between U.S. and Canadian oil has not been due to an absence of pipeline entry however extra as a result of a collection of refinery outages within the U.S. Midwest, which have lessened the flexibility for working refineries to tackle extra barrels of Canadian heavy crude.

However, consultants say a Keystone shutdown of various days would shortly begin to impression transport of Canadian oil each to the U.S. storage hub in Cushing, Okla. and to refiners alongside the U.S. Gulf Coast. The ensuing glut would power Canadian oil producers to start promoting barrels at an elevated low cost.

“If this lasts a long time, and you begin to have egress constraints again, that starts nudging the differential open,” stated Rory Johnston, an oil markets analyst and founding father of the Commodity Context publication.

“It’s not a great situation for Canadian crude shippers, and particularly producers of Canadian heavy oil, at this particular moment.”

The Keystone pipeline system stretches 4,324 kilometres and helps transfer Canadian and U.S. crude oil to markets round North America.

There have been a handful of spills alongside the pipeline’s route in recent times, essentially the most important of which had been in November 2017 and October 2019.

The 2017 leak noticed roughly 6,600 barrels of oil spilled in North Dakota, and the 2019 spill noticed roughly 4,500 barrels spilled in South Dakota.

Vijay Muralidharan, power analyst and managing director with R Cube Consulting Inc., stated the 2017 spill specifically was an issue for Canada. In the ten days that the pipeline was shut down, WTI costs jumped and Canada’s WCS fell sharply, taking a chunk out of the Canadian power sector’s income.

However, the 2017 spill additionally got here at a time when Canada had considerably much less pipeline area. The addition of Enbridge’s Line 3 alternative undertaking, which got here on-line in 2021, has added important capability.

Still, he stated markets had been jittery Thursday.

“Because (traders) don’t know how long (Keystone) is going to be shut, it’s pretty mild,” Muralidharan stated, including the worth of WTI jumped instantly after news of the spill broke however has since settled.

But he stated 10 days is concerning the longest the pipeline might be shut down earlier than a major market impression.

“If the news gets out that it’s going to be shut for longer, you’re going to see panic and pandemonium on the markets.”

Johnston stated his “base case estimate” is that Keystone might be down for 2 weeks.

“That said, it’s very, very hard to tell early on how much of an issue this is going to be,” Johnston stated. “A lot of the leak is sub-surface, the ground is frozen … It’s going to be a little while until we know the full extent.”

Wednesday’s spill has additionally supplied ammunition for environmental activists south of the border. In an announcement, Catherine Collentine of the Sierra Club referred to a “toxic” spill from the Keystone pipeline and used the adverse time period “tar sands” to explain Canada’s oil producing area of northern Alberta.

“This is not the first time this pipeline has spilled and unfortunately we know all too well that it won’t be the last,” Collentine stated. “There is no such thing as a safe tar sands pipeline.”

Fears about potential pipeline leaks – in addition to issues about local weather change – helped stoke opposition south of the border to TC Energy’s proposed Keystone XL undertaking, which might have minimize throughout Montana, South Dakota and Nebraska.

U.S. president Joe Biden cancelled the allow for that undertaking instantly after his inauguration, and TC Energy formally pulled the plug on it in June 2021.

This report by The Canadian Press was first printed Dec. 8, 2022.

– With information from The Associated Press