Keystone pipeline closure leads Phillips 66 to shut Illinois refinery units

By Jarrett Renshaw

NEW YORK, April 6 (Reuters) - The sudden closure of the Keystone oil pipeline from Canada has forced Phillips 66 to shut several units at its Illinois refinery, sources said on Tuesday, as the ripple effects of disrupting one of the largest US import lines spread.

TransCanada said it had shut its 590,000-bpd Keystone pipeline system, which carries light and heavy crude from Alberta to Cushing, Oklahoma, and into Texas, on Saturday due to a potential leak in South Dakota. It told shippers the line may not resume operating until Friday.

Company work crews are still investigating the leak, as is the US Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA).

Although US cash crude traders said the outage was having a limited impact on markets given expectations the line would quickly resume operating, at least one big refinery that relies heavily on Keystone was feeling the effect.

Phillips' plant in Wood River, Illinois, has shut down a 64,000-bpd sour crude unit and a 16,000-bpd coker due to the disruption in supply, two sources told Reuters. A day ago it had cut production rates at the 306,000-bpd refinery, although it has since restored full operations at other units.

The company also advanced some planned work on the units during the shutdown, which could extend beyond the restart of the pipeline, the sources said. The plant imported nearly 200,000 bpd of heavy sour Canadian crude last year, according to US government data.

Phillips 66 confirmed that it cut rates at the refinery to deal with the pipeline issues, but declined to discuss or confirm the shutdown of the units.

"At this time we are still meeting product supply commitments to our customers in the region," Phillips 66 said.

Canadian heavy crude differentials widened on Monday on news of the pipeline shut down. Western Canada Select heavy blend crude for May delivery in Hardisty, Alberta, last traded on Monday at $13.90/bbl below the West Texas Intermediate benchmark, according to Shorcan Energy brokers. That compares with a settlement of $13.30/bbl below the benchmark on Friday.

The prices are holding at the same level today, traders say.