TransCanada Corporation has reached an agreement to become the sole owner of the Keystone Pipeline System through the acquisition of ConocoPhillips’ remaining interest in the project for approximately US$550 million plus the assumption of approximately US$200 million of short-term debt. The purchase price reflects ConocoPhillips’ capital contributions to date and includes an allowance for funds used during construction. TransCanada will also assume responsibility for ConocoPhillips’ share of the capital investment required to complete the project resulting in an incremental commitment of approximately US$1.7 billion through the end of 2012. The transaction is expected to close in third quarter 2009, subject to the receipt of certain regulatory approvals.
“This acquisition represents a unique opportunity for TransCanada to become the exclusive owner of an important oil transmission system that will play a vital role in transporting a growing supply of Canadian crude oil to the largest refining markets in the United States for decades to come,” said Hal Kvisle, TransCanada president and chief executive officer. “We believe the significant commercial support Keystone has received to date highlights the value it will create for our customers and our shareholders.”
When completed, Keystone will be one of the largest oil delivery systems in North America with the capacity to deliver 1.1 MMbop/d. million barrels per day. The first phase of Keystone is currently under construction. It will extend 2,148 miles from Hardisty, Alberta to U.S. Midwest markets. It will have an initial nominal capacity of 435,000 bpd and serve markets in Wood River and Patoka, IL. Commissioning of this segment is expected to commence in late 2009 with commercial operations to follow in early 2010. The line will subsequently be expanded to a nominal capacity of 590,000 bpd and extended to Cushing, OK. Commissioning of the Cushing segment is expected to commence in late 2010.
Keystone is also currently seeking regulatory approvals in Canada and the U.S. to construct and operate an expansion and extension of the pipeline system that will provide additional capacity of 500,000 bpd from Western Canada to the U.S. Gulf Coast in 2012. The Keystone expansion will extend 1,690 miles from Hardisty, Alberta to a delivery point near existing terminals in Port Arthur, TX. Construction of the expansion facilities is anticipated to commence in 2010 following the receipt of the necessary regulatory approvals.