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Nexen Joins ConocoPhillips in Cutting Oil Sands Output

Source: Reuters 4/6/2017, Location: North America

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Two oil sands producers in northern Alberta have cut production at their facilities due to a shortage of synthetic crude, market sources said, causing Canadian and U.S. crude prices to surge to multi-year highs.

Synthetic supplies are scarce following a fire at the 350,000 barrel-per-day (bpd) Syncrude plant in March that damaged the facility and forced the operator to bring forward maintenance and cut production for April to zero.

As a result ConocoPhillips reduced output at its 140,000 bpd Surmont project, a joint venture with Total E&P Canada, by 40 percent, two market sources said. They spoke on condition of anonymity because they are not authorized to speak to the media.

The company mixes synthetic crude from Syncrude with tarry bitumen from its oil sands reservoir to create a heavy crude blend known as "synbit" that can flow through pipelines.

CNOOC Ltd subsidiary Nexen Energy, which likewise uses synthetic crude to dilute its bitumen, cut output from its Long Lake oil sands project this month by 48 percent, said one of the two sources, as well as two separate sources.

Long Lake usually produces around 40,000 bpd of undiluted bitumen, one source said.

ConocoPhillips spokeswoman Michelle McCullagh, who earlier this week confirmed that the Syncrude outage affected Surmont output, declined to comment on the size of the production cut.

Nexen Energy spokeswoman Brittney Price said her company does not publish production or maintenance operations for individual assets.

Syncrude, a joint venture majority-owned by Suncor Energy Inc, is expected to return to operations the first week of May but will be running at reduced rates that month, trading sources said.

The oil sands outages have boosted Canadian heavy crude prices, with the benchmark Western Canada Select blend for May delivery last trading close to a 22-month high of $9.60 a barrel below U.S. crude, according to Shorcan Energy brokers.

On Wednesday WCS settled at $9.85 per barrel below U.S. crude.

Meanwhile, Mars Sour WTC-MRS traded up to $1.20 a barrel discount to U.S. crude on Thursday, the narrowest discount since September 2015, according to Reuters data. Light Louisiana Sweet WTC-LLS traded up to $2.35 a barrel over WTI, the widest premium since March 2016.

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Related Categories: Coalbed Methane  General  Heavy Oil  Oil Sands  Oil Shale  Shale Gas  Tight Gas  Tight Oil 

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