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TransCanada to take sole ownership of Keystone pipeline system

Christopher E. Smith
OGJ Pipeline Editor

HOUSTON, June 17 -- TransCanada Corp. reached agreement with ConocoPhillips to buy its remaining interest in the Keystone pipeline system for roughly $550 million plus the assumption of $200 million of short-term debt. Upon completion of the transaction, TransCanada will be sole owner of the project.

The purchase price reflects ConocoPhillips’s capital contributions to date and includes an allowance for funds used during construction. TransCanada will also assume ConocoPhillips’s share of the costs associated with completing the project, an incremental commitment of roughly $1.7 billion through the end of 2012.

Pending regulatory approval, the transaction is expected to close in the third quarter.

TransCanada’s 2,148-mile Keystone pipeline will transport oil from Canada to the US Midwest. In addition to 1,379 miles of newbuild US line, Keystone includes additions to existing Canadian pipelines and mainline flow reversals. It is expected to start up in December 2009 with the capacity to deliver 435,000 b/d from Hardisty, Alta., to the US at Wood River and Patoka, Ill.

TransCanada plans to extend the line to Cushing, Okla., starting fourth-quarter 2010, expanding it to 590,000 b/d. It has secured firm long-term contracts totaling 495,000 b/d for an average of 18 years.

New pipeline construction of 101 km in Manitoba was about 98% complete as of Apr. 15. TransCanada plans work on a total of six spreads in South Dakota, Nebraska, Kansas, Missouri, and Illinois during 2009.

TransCanada announced plans in July 2008 for the Keystone Gulf Coast Expansion Project (Keystone XL), providing 500,000 b/d additional capacity from western Canada to the US Gulf Coast by 2012. Keystone XL has secured firm contracts for 380,000 b/d for an average of 17 years from shippers.

Keystone XL includes 1,980 miles of 36-in. OD line starting in Hardisty and extending to a delivery point near existing terminals in Port Arthur, Tex. TransCanada anticipates beginning construction in 2010, pending regulatory approvals, and intends to start the line in 2012.

The combined Keystone pipeline system could be expanded to 1.5 million b/d from its as-built capacity of 1.09 million b/d if warranted by market demand.

Contact Christopher E. Smith at chriss@ogjonline.com.


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