Dec 8 (Reuters) – Canada’s TC Energy said on Thursday it had shut down its Keystone oil pipeline, blocking the flow of Canadian oil to U.S. refineries after a spill in a Kansas creek, and it was unclear how long would last the closure.
The size and cause of the leak, which occurred about 20 miles south of a key junction in Steele City, Nebraska, is unknown.
The Keystone Line, with a capacity of 622,000 barrels per day, is a critical artery that carries heavy Canadian crude from Alberta to refiners in the US Midwest and Gulf Coast.
US Pipeline and Hazardous Materials Safety Administration (PHMSA) personnel are investigating the leak, which occurred near Washington, Kansas, a city of about 1,000 people.
Keystone closed the line around 8 p.m. CT Wednesday (0200 GMT Thursday) after alarms sounded and system pressure dropped, TC (TRP.TO) said in a statement. He said booms were being used to contain the spill.
“The system remains shut down as our crews actively respond and work to contain and recover the oil,” the statement said.
There were no effects on drinking water wells or the public, the U.S. Environmental Protection Agency (EPA) said in a statement, although surface water from Mill Creek was affected. He sent two coordinators to the site to oversee the TC Energy response and assess the cause of the spill.
TC declared force majeure over the outage, according to a source with direct knowledge, which refers to unforeseen external circumstances that prevent a party to a contract from fulfilling its obligations. TC did not respond to a request for comment.
Two Keystone shippers said TC has not yet informed them of how long the pipeline will be closed.
The closure of Keystone will hamper deliveries of Canadian crude both to the US storage facility in Cushing, Oklahoma, and to the Gulf, where it is processed by refiners or exported.
The shutdown is expected to increase the discount on Western Canada Select (WCS) heavy oil from Alberta relative to U.S. crude, which was already high due to weak demand for heavy, sour Canadian oil.
WCS for December delivery was trading at $33.50 a barrel below WTI, a bigger discount than Wednesday’s settlement of $27.50 a barrel below the benchmark, a broker said.
“It’s really a worst-case scenario if this outage lasts a long time,” said Rory Johnston, founder of energy newsletter Commodity Context, noting that if the price drops further, shippers may choose to transport crude by road. of iron.
The Hardisty, Alta., hub has enough storage space until the pipeline comes back online, said BMO analyst Randy Ollenberger.
Steele City is roughly the junction where Keystone splits, with one segment carrying crude to refineries in Illinois and the other carrying oil south to Oklahoma and the Gulf Coast.
If the spill is located south of the junction, TC may be able to quickly restart the segment to Illinois, RBC analyst Robert Kwan said in a note.
Past closures have typically lasted about two weeks, but it could be longer because it’s a body of water, Kwan said.
There have been seven spills on Keystone since it was commissioned in June 2010, according to PHMSA data. The largest were in December 2017, when more than 6,600 barrels spilled in South Dakota, and in November 2019, when more than 4,500 barrels spilled in North Dakota, according to PHMSA.
On Nov. 15, TC announced it would reduce volumes on the pipeline due to some severe weather incidents, without specifying the size or duration of the restrictions.
Shares of TC ended down 0.1% in Toronto.
Reporting by Arpan Varghese, Brijesh Patel and Deep Vakil in Bengaluru, Rod Nickel, Nia Williams and Arathy Somasekhar; Editing by Alexander Smith, Andrea Ricci and Josie Kao
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