By Arathy Somasekhar and Amanda Stephenson
HOUSTON, May 5 (Reuters) - A proposed pipeline for carrying Canadian crude oil to the United States is close to securing the minimum commitments from oil companies that the project needs to go ahead, four sources familiar with the matter told Reuters.
The Alberta-to-Wyoming pipeline, proposed by Canadian pipeline company South Bow Corp and its U.S. partner Bridger Pipeline, could increase Canada's crude exports to the U.S. by more than 12% if it goes ahead,
bringing much-needed pipeline takeaway capacity to Canada.
U.S. President Donald Trump last Thursday signed an order granting a cross-border permit to the project. In 2021, President Joe Biden formally revoked the permit needed to build the Keystone XL oil pipeline, the last major pipeline proposed between Canada and the United States.
While the new proposal takes a different route through the U.S. than the canceled Keystone XL, South Bow's portion would revive about 150 km (93 miles) on the Canadian side that has already been built and is sitting idle. That pipe would then connect to Bridger's proposed pipeline in Montana and extend about 645 miles to Guernsey, Wyoming.
Oil companies have committed to move at least 400,000 barrels per day (bpd), or about 72% of the pipeline's initial capacity of 550,000 bpd, the four sources said. The project would eventually be capable of moving up to 1.13 million bpd, according to a regulatory filing by Bridger.
Oil output from Canada, the world's fourth-largest producer, was about 5.5 million bpd at the end of January, according to the country's energy regulator. That could climb as high as 6.1 million bpd by 2030.
South Bow and Bridger are aiming to secure long-term contracts for about 450,000 bpd, two of the sources said, which would clear the threshold of 80% of initial capacity that pipeline operators typically seek before moving ahead with construction.
Top shippers that have committed to move oil on the pipeline include Cenovus Energy and Canadian Natural Resources Ltd (CNRL), one of the sources said. Others include Tamarack Valley, Whitecap Resources, and Strathcona Resources, the source added.
The sources spoke on condition of anonymity as shipper commitments are confidential.
South Bow did not comment on committed capacity, saying the project remains in the early stages and is subject to ongoing commercial, stakeholder and rights-holder discussions, regulatory processes, and evaluation.
Bridger declined to comment. In a regulatory filing in March, the company said the project was being developed in response to identified market interest and that commercial discussions were ongoing.
Cenovus, CNRL, Tamarack and Strathcona declined to comment on commitments.
Whitecap CEO Grant Fagerheim said the oil industry's engagement on the pipeline has been constructive and there looks to be sufficient momentum to achieve the minimum thresholds required for the project, adding that backing from the U.S. administration was very helpful. The company did not comment further on commitments.
CANADA'S OIL COMPANIES KEEN ON U.S. PIPELINE
The commitments signal Canadian oil producers' eagerness for takeaway capacity for the country's oil output, which has for years been choked back by a lack of pipelines to move it.
Rival pipeline operators are also looking to expand capacity on existing pipelines.
Last fall, Enbridge approved expansions for its Mainline and Flanagan South pipelines, which will allow an additional 150,000 bpd of Canadian heavy oil to move to the U.S. Midwest and Gulf Coast.
That additional capacity is expected to come online in 2027, and the company is also gauging commercial interest in a second phase of its Mainline expansion, which it has said could be in service in 2028 and would add another 250,000 bpd of capacity.
The Trans Mountain pipeline, running from Alberta to Canada's west coast for export to the U.S. West Coast and Asia, is also planning a series of enhancements that could increase its capacity by 360,000 bpd.
Bridger's current proposal is to build a pipeline from Montana to Guernsey, Wyoming, in locations alongside existing pipeline infrastructure, potentially making it easier to get required permits.
Analysts, however, say Guernsey is not an end market for crude oil, so additional links would need to be built to refining hubs such as Cushing, Oklahoma, Patoka, Illinois, and the U.S. Gulf Coast.
The project offers one of the most economic options for shippers to increase oil supplies out of Western Canada by the end of the decade, said AJ O'Donnell, an analyst at Tudor Pickering, Holt & Co.
"While uncertainty remains around the final economics, we believe this represents the most logical approach to adding incremental oil egress capacity through the end of the decade," O'Donnell wrote in a note.
"Our view is that additional egress is needed regardless of the geopolitical backdrop."
(Reporting by Arathy Somasekhar in Houston and Amanda Stephenson in Calgary; Editing by Edmund Klamann)
