TransCanada sees Keystone start-up in June

CALGARY, Alberta (Reuters) - TransCanada Corp (TRP.TO) still expects its $5.2 billion Keystone pipeline to be operating by the end of June, after delaying the completion of the project's first 435,000 barrel per day leg last month, the head of the company's pipeline division said on Monday.

Russ Girling, chief operating officer of Canada's biggest pipeline company, told the Reuters Canadian Oil Sands Summit that TransCanada continues to fill the line with oil in preparation for the start of operations, with 1.5 million barrels of the 9 million needed in the line, enough to fill 500 km (310 miles) of the pipe, or about a sixth of its length.

"We should be filled by the middle of June or toward the end of June and ready for full start-up," Girling said. "It will take us through probably to the end of the year to get everything working right and by 2011 we'll be fully operational."

TransCanada is best known for its Canadian and U.S. natural gas pipelines, but the company is readying to start transporting oil sands crude to U.S. refiners.

The linefill is going into Keystone's first stage, which will run from near Edmonton, Alberta, to the refining hubs of Wood River and Patoka, Illinois, and carrying 435,000 bpd.

When that leg is complete, Keystone will be extended to Cushing, Oklahoma, and expanded to handle 540,000 bpd by 2011.

TransCanada is also planning the Keystone XL line, which will expand the oil sands system to a capacity of 1.1 million bpd, including 500,000 bpd to the cluster of U.S. refineries on the Gulf of Mexico.

Keystone XL will give Canadian producers the first major access to the region, which can offer premium prices for oil sands' crude. That will narrow the differentials, or price spreads, between light oil and the heavy crude from the oil sands.

"Differentials have already begun to come in just on speculation of the pipeline being in place," Girling said.

While the Keystone XL line could be further expanded as demand warrants, displacing crude the United States now imports from Venezuela, Mexico and elsewhere, Girling said that California, not currently served by Canadian pipelines, could be another possible market for oil sands crude.

"California is another marketplace where a lot of the crude oil that is refined today is imported from elsewhere," he said. "In terms of logical markets for Canadian crude to penetrate, that would ... probably be the next large significant market."

($1=$1.02 Canadian)

(Reporting by Scott Haggett; editing by Rob Wilson)