A US investigation into the 13,000-barrel oil spill on TC Energy’s Keystone pipeline is expected to reduce crude flows ahead of the summer driving season.
Regulators on Tuesday ordered the company to reduce operating pressure along the entire Keystone system that stretches from Hardisty, Canada, to Cushing, Oklahoma until further notice.
The new restrictions will likely force the pipeline to slow flows, according to Richard B. Kuprewicz, president of Accufacts Inc, a regulatory adviser to the pipeline. TC Energy said in a statement that while it expects to meet its contractual obligations to deliver oil, it will not be able to accommodate spot shipments, which typically account for about 6 percent of flows. It was not immediately clear how or if flows from the Marketlink connecting pipeline would be affected.
The new order increases restrictions placed on the pipeline after a 13,000-barrel oil spill in Kansas in December. Keystone had recently increased production rates, with flows averaging 594,000 barrels a day in March compared with an average of 597,000 barrels a day in November, according to Genscape data seen by Bloomberg.
Immediately before the spill, the company had increased flows to nearly 650,000 barrels a day, Genscape data showed.
Keystone had recently returned operating rates to pre-shutdown levels, with flows averaging 594,000 barrels per day in March, according to Genscape data seen by Bloomberg.
The pipeline, which can move up to 640,000 barrels a day of heavy Canadian crude to the Gulf Coast, is now facing reduced supplies just as U.S. refineries are ramping up ahead of summer, when annual demand for gasoline tends to peak. The several-week shutdown of the pipeline in December rattled markets, forcing refiners to scramble to recover lost barrels.
Canadian crude prices weakened after the order with Western Canadian Select’s steep discount to U.S. benchmark West Texas Intermediate widening 35 cents to $15.85 in Alberta, according to data compiled by Bloomberg.
Before the spill, US regulators had allowed Keystone to operate at a higher pressure than other pipelines. The Hazardous Materials and Pipeline Safety Administration said Tuesday that more remedial action was needed to address the pipeline’s “repetitive pattern of failures” and the “increasing severity of the spills.”
Keystone has been one of the leakiest crude oil pipelines in the US since 2010, spilling more than 25,000 barrels, many of them attributed to construction deficiencies, according to government data.
–With help from Ari Natter.
