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Oil Pipeline Being Extended

July 17, 2008

By Rod Walton, Tulsa World, Okla.

Jul. 17–The Keystone Pipeline that will transport Canadian crude oil to a hub in Cushing and elsewhere will be extended over the next four years to the Gulf Coast, a ConocoPhillips spokesman said Wednesday.

A $7 billion expansion could add an additional 500,000 barrels in daily capacity through the pipeline system, reports show.

The initial 2,148-mile Keystone project, now under construction, will connect Hardisty, Alberta, to hubs in Cushing and Patoka, Ill., by 2010.

ConocoPhillips and TransCanada Corp., which are partners in the project, hope to finish the 1,980-mile expansion to Houston and Port Arthur, Texas, by 2012. The total capacity will be close to 1.1 million barrels of oil per day when the entire project is completed at a cost of $12 billion.

“This ties into our overall strategic business plan there in that it just allows us to integrate our northern assets,” a ConocoPhillips spokesman, Bill Graham, said in a phone interview from Houston, where the company is based.

ConocoPhillips is involved in exploration and production projects throughout western Canada.

“We also have extensive refining in the Midwest and Gulf Coast,” Graham said. “It gives us, too, better access to more

secure sources of crude oil out of Canada.”

Canada has become the United States’ No. 1 source of imported oil. The northern neighbor sends about 1.84 million barrels a day into the U.S., about 300,000 barrels more than second-place Saudi Arabia, according to the Energy Information Administration.

With worldwide supply and security issues, production problems in Mexico, and Venezuelan political roadblocks to U.S. oil producers, ConocoPhillips and other companies must work harder to find and transport more oil from secure sites, Graham noted.

“It’s a constant struggle to find additional sources of crude oil,” he said.

The expansion will take a more direct route from Hardisty to Steele City, Neb., near the Kansas border, than the first pipeline does. Crude oil could then travel through the first pipeline from Steele City to Cushing for transport to the refinery at Ponca City or elsewhere, Graham said. The new project would extend the 36-inch pipeline from Cushing to the Texas coast.

Reports show that prospective shippers already have signed on for up to 830,000 barrels per day over 18 years. The addition of pump stations could increase the capacity by an additional 400,000 barrels per day.

ConocoPhillips and TransCanada were equal partners on the first phase of the Keystone Pipeline. Other parties could step up to take a share in the ownership of the expansion, Graham said.

Rod Walton 581-8457 rod.walton@tulsaworld.com

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