CALGARY, Alberta, Jan 22 (Reuters) - TransCanada Corp chief executive Russ Girling on Wednesday shot down speculation Canadian crude oil transported across the U.S. through the company’s new Gulf Coast Project pipeline could be bound for re-export overseas, saying there was no chance of that occurring in his lifetime.
The new pipeline will eventually transport 830,000 barrels per day from the U.S. oil storage hub in Cushing, Oklahoma, to the cluster of refineries on the U.S. Gulf Coast.
Linking in with TransCanada’s existing 590,000 bpd Keystone pipeline, which takes crude from Hardisty in central Alberta to Cushing, it will provide the first substantial direct link between Alberta’s oil sands and North America’s largest refining center.
Speaking at a news conference to mark the opening of the new pipeline, Girling poured cold water on suggestions Canadian crude could transit the United States and then be re-exported to reach global markets.
“Not a chance. Not in my lifetime,” he said. “I have talked to every one of our customers, both producers and refiners, I’ve asked them the question again - do you have any intent of shipping any of this crude oil offshore and the answer is absolutely not.”
The notion of using U.S. pipelines to transport Canadian crude to tidewater for re-export is controversial because it undermines the argument that new pipelines carrying oil sands crude, including TransCanada’s contentious Keystone XL project, would enhance U.S. energy security.
Increased pipeline takeaway capacity has raised concerns an oil supply glut in the U.S. storage hub of Cushing might simply shift to the Gulf Coast.
That in turn has fanned talk Canadian oil sands producers could step up efforts to access global prices by re-exporting crude via the U.S. Gulf Coast.
Canadian heavy crude at times has traded at a discount of more than $40 per barrel below the West Texas Intermediate benchmark because transport constraints leave it bottlenecked in landlocked Alberta.
At present just 300,000 bpd of oil sands crude reaches the Pacific Coast via Kinder Morgan Energy Partners LP’s Trans Mountain pipeline, and a pipeline between Alberta and Canada’s Atlantic Coast is not expected to start until 2018.
TransCanada’s Gulf Coast Project between Cushing and Nederland, Texas, will ship on average 520,000 barrels per day of Canadian and U.S. crude to refineries in 2014, with capacity ramping up to 830,000 bpd later this year.
But Girling stressed all crude shipped on the line would be destined for U.S. refiners, given the U.S. Gulf Coast currently imports about 4.5 million bpd.
“We would have to increase domestic (North American) production by 4.5 million barrels a day and push it to that market before you’ll see any crude oil leaving the continent,” he said.
“It makes no sense to see anything being shipped offshore. There’s no factual underpinning, no evidence, no basis for those kind of claims.”