Likely months before Keystone crude line full return

TC Energy's 622,000 b/d Keystone crude pipeline has now been shut for a week and with the cause of the leak in northern Kansas still unknown, past incidents suggest a long haul before it is fully operational again.

The Keystone system has been down since 7 December after 14,000 bl of crude was spilled into a creek near Washington, Kansas.

Cleanup efforts continue and about 2,600 bl had been recovered as of 12 December. TC Energy did not provide a more current figure today.

The system is a major route for Canadian heavy crude destined for the US midcontinent and Gulf coast and this upset is the latest of several incidents to disrupt the market since being commissioned in 2009.

A November 2017 spill of 9,700 bl in South Dakota forced a shutdown spanning 12 days, but it took until May the following year before the US Pipeline and Hazardous Materials Safety Administration (PHMSA) allowed the pipeline to return to full rates. An 80pc pressure limit was applied to the entire system during the span.

Prices for heavy sour Western Canadian Select (WCS) at Hardisty, Alberta, went into free-fall at the time, with its discount to the Nymex WTI calendar month average more than doubling on account of the upset. Canada's heavy sour benchmark fell from about a $14/bl discount in November 2017, widening beyond a $30/bl within three months.

Pipeline expansions now provide crude shippers with greater export options out of Canada, and greater amounts of storage can allow them to bide their time, but a pinch point could arrive later if the latest outage persists. WCS at Hardisty has given up about $2/bl since the Keystone upset, assessed at a $28.30/bl discount to the January basis on 13 December, but the impact has been more pronounced further downstream.

WCS prices in Cushing, Oklahoma, and Houston, Texas, hubs have been driven up by about $4/bl and $5/bl respectively since the Keystone outage.

Keystone has been off line because of vandalism in South Dakota, a 2019 October leak in North Dakota, a February 2019 leak in Missouri, an April 2016 spill in South Dakota, and other incidents during the first few years of operation. This includes being shut down 14 times in its first 13 months of service.

Not all shutdowns involved spills, with some coming for precautionary reasons and some because of third-party events.

By Brett Holmes