TransCanada to restart Keystone pipeline by Saturday upon PHMSA approval

NEW YORK (Reuters) - TransCanada Corp expects to restart its Keystone crude pipeline by Saturday, upon receiving conditional approval from the Pipeline and Hazardous Materials Safety Administration (PHMSA), the company said in emailed statement on Friday.

A TransCanada Keystone Pipeline pump station operates outside Steele City, Nebraska March 10, 2014. REUTERS/Lane Hickenbottom

TransCanada said its 590,000 barrel per day pipeline should be fully operational by end of day Saturday.

As part of the restart, TransCanada will reduce the pressure on the line to ensure it is functioning properly and meeting conditions laid out by PHMSA, the statement said.

The company also said it will conduct aerial patrols and visual inspections during the restart.

The pipeline, which delivers crude from Hardisty, Alberta, to Cushing, Oklahoma and to Illinois, was shut last weekend after a potential leak in South Dakota.

In an e-mailed statement to media on Friday, the company said it identified a small leak near its Freeman pump station in Hutchinson County, South Dakota.

The company added that it would be working with PHMSA to return the line to service following completion of the repairs.

On Thursday, the Canadian pipeline company said about 400 barrels of oil could have leaked in South Dakota from its pipeline, but was still investigating the source of the spill.

The spread between front to second month U.S. crude futures widened by as much as 7 cents in the 10 minutes following news of the Tuesday restart. It settled with May crude at a $1.27 a barrel discount to June barrels.

The outage caused Canadian cash crude prices to fall throughout the week with barrels for May delivery dropping to two-month lows in the Hardisty, Alberta, hub.

“There are only a handful of pipelines available to export barrels out of Canada and when a large pipeline like Keystone goes offline, Canadian barrels become stranded and prices suffer,” said Michael Tran, director of energy strategy at RBC Capital Markets in New York.

The restart quickly propped up Western Canadian Select heavy blend crude for May, which traded last at $14.35 a barrel below benchmark West Texas Intermediate, according to Shorcan Energy brokers, from an intraday high of $15.05 a barrel discount.

Reporting By Catherine Ngai; additional reporting by Liz Hampton in Houston; editing by Chris Reese, Dan Grebler and Diane Craft