Oil prices spike as oilsands shutdowns limit production

A shutdown at the Syncrude oil sands facility in northern Alberta has caused a production shortage that’s helped push heavy Canadian crude prices to the narrowest discount in nearly two years.

The 350,000 barrel-per-day Syncrude project cut production for all of April to zero, according to market sources, following a fire last month that damaged the facility and forced the operator to bring forward planned maintenance.

ConocoPhillips has had to reduce production at its 140,000 bpd Surmont thermal plant because it uses light synthetic crude from Syncrude, one of the largest producers in Canada’s oil sands, to dilute tarry bitumen into a heavy blend that can flow through pipelines.

“(The) Syncrude outage has had an impact on our output, but we are working with suppliers to understand the timeline as the Syncrude owners work towards a full recovery,” ConocoPhillips Canada spokeswoman Michelle McCullagh said in an email.

She did not specify the reduction in crude volume, but combined with the Syncrude outage, up to 490,000 bpd, or nearly one fifth, of the oil sands’ 2.5 million bpd of supply is potentially off the market.

On top of that Suncor Energy’s 180,000 bpd Firebag thermal plant is also undergoing planned maintenance this quarter, adding to the shortage of heavy crude.

Canada produces around 4 million bpd and exports about 3.1 million bpd, almost entirely to the United States.

The sudden lack of supply is causing prices to surge. Western Canada Select, the main blend of oil that comes out of Canada’s oilsands, was going for $41.35 US a barrel on Thursday. That’s the highest it’s been since the summer of 2015.

And the gap between Canadian oil and the U.S. benchmark, West Texas Intermediate, has also narrowed to its smallest level in almost two years at $9.80 a barrel on Thursday morning.

Syncrude is a joint venture majority-owned by Suncor Energy Inc, while Imperial Oil Ltd. provides operational, technical and business management support.

SOURCE: CBC.ca

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