The southern leg of the Keystone XL pipeline started shipping oil on Wednesday, and that's good news for Valero and other oil refiners.
Keystone, operated by TransCanada, began transporting light, sweet crude from Cushing, Okla., to Port Arthur, Texas. Estimates suggest that when operating at full capacity, the 485-mile pipeline will be able to transport anywhere from 700,000 to 800,000 barrels of crude per day for refining.
The operation of the southern leg of Keystone represents a significant development within the energy industry, as it substantially increases Gulf Coast refinery access to midcontinent crude.
"The opening of the Keystone Pipeline south leg triples the amount of pipeline capacity from Cushing, Okla., to the Texas Gulf Coast," said Andy Lipow, president of Lipow Oil Associates. "The oil that arrives in the Port Arthur area will now be accessible to about 25 percent of the nation's refinery capacity because it will be connected by pipeline not only to Port Arthur but to Lake Charles and the New Orleans refining centers."
Aside from access, the pipeline also provides a cost advantage for refiners. According to Bill Day, a vice president at Valero, the pipeline will reduce the company's refining cost by roughly $15 per barrel.