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UPDATE 4-TransCanada shuts Keystone line due to new leak
May 31, 2011 / 1:05 PM / in 7 years

UPDATE 4-TransCanada shuts Keystone line due to new leak

* Keystone pipeline shut down for second time this month

* Line to remain shut for a few more days

* 10-barrel leak in Kansas caused by faulty fitting

* Parts of Enbridge U.S. network shut by storms

* Oil prices rise on shutdown (Add details and comment; updates prices. In U.S. dollars unless noted)

By Scott Haggett

CALGARY, Alberta, May 31 (Reuters) - TransCanada Corp (TRP.TO) said on Tuesday it will take a few more days to reopen its 591,000 barrel per day Keystone oil pipeline after its second spill in less than a month shut the line, pushing oil prices higher.

The line was shut on Sunday after a half-inch fitting failed at the Severance pumping station in Kansas. The fitting leaked less than 10 barrels (420 gallons) of oil, said company spokesman Terry Cunha, down from an earlier estimate of a 40-barrel spill.

A problem with a larger fitting was blamed for a 500-barrel leak earlier this month at another Keystone pumping station in North Dakota. That shut the line for six days while the company replaced similar fittings at its other pumping stations.

Cunha said TransCanada will now have to examine fittings in 21 pumping stations similar to the one that failed, delaying the reopening of the line.

“The restart will probably not be for a few more days,” he said. “We’ll go through those 21 (stations) and investigate to ensure those fittings are working properly.”

Canada is the largest supplier of oil to the United States, shipping about 2 million barrels a day, but the pipelines that deliver that crude have been subject to leaks, spills and shutdowns.

Enbridge Inc (ENB.TO), whose lines carry the bulk of Canada’s crude exports, said storm-related power outages over the weekend shut down a number of its oil pipelines in the U.S. upper Midwest [ID:nN31299604]. The system was expected to return to normal operations later on Tuesday.

Keystone which runs from Hardisty, Alberta, to Cushing, Oklahoma, is a key feed for the Cushing oil storage hub, the pricing point for the New York Mercantile Exchange’s benchmark crude contract.

U.S. crude prices CLc1 rallied on news of the outage, rising at one stage by almost $3 a barrel to a high of $103.39 on Tuesday, climbing faster than London-based benchmark Brent LCOc1. Prices had pulled back on weaker U.S. economic data, but closed at $102.70 a barrel, up $2.11.

Differentials for West Texas Sour crude moved up about 25 cents on the news of the pipeline shutdown, traders said, with bids holding $2.25 under benchmark West Texas Intermediate CLc1 and offers up 10 cents to $2.15 under.

“I think it (WTS) is partly being used as a backup if the line is down for a while,” said John Troland, an independent oil consultant based in Houston.

Record levels of crude at Cushing should mitigate any large price moves. Last week, inventories at the oil delivery hub stood at 40.1 million barrels, slightly below the record high of 41.9 million reached earlier in May.

The shutdowns had little immediate effect on Canadian cash crude prices. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a factbox of recent pipeline ruptures click on [ID:nN31290944] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The U.S. government is investigating the cause of the leak, the Transportation Department’s Pipeline and Hazardous Materials Safety Administration said on Tuesday.

The probe “will examine if there are similarities between this weekend’s failure and any prior failures on the system,” including the one earlier this month, an agency spokeswoman said.

The spills come at an inopportune time for TransCanada, which is seeking approval of a $7 billion expansion of Keystone.

The Keystone XL project would add a line from Hardisty, Alberta, to Steele City, Nebraska, and an extension from Cushing to Nederland, Texas, to take Canadian crude oil to the Gulf Coast refining hub.

The extension has been bitterly opposed by some state and federal legislators, as well as environmental groups concerned about greenhouse gas emissions from expanded oil sands production.

There are also concerns about the threat of oil spills in sensitive areas along the route. Opponents will likely use the weekend spill to further bolster their case against the line.

The U.S. State Department is expected to rule on whether to approve the line by year end.

$1=$0.97 Canadian Additional reporting by Jeffrey Jones, Julie Gordon, David Sheppard, Ayesha Roscoe, Erwin Seba and Janet McGurty; editing by Rob Wilson

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