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The Oil Sands Weekly

The Oil Sands Weekly

IN THE NEWS THIS WEEK:
  • Suncor executive takes top spot at Syncrude
  • MEG makes progress at Christina Lake
  • Imperial improves reliability at Kearl
  • Thermal output continues to grow at Husky
  • Surmont posts record production in Q3
  • SNC scores services contract with Chevron
  • Irving Oil turns the page on Lac Mégantic
  • Kinder Morgan takes spat with Burnaby to the NEB
  • Canadian construction giant sold to Chinese government
  • New carbon taxes planned for NB and Manitoba
  • Line 3 hearings postponed in Minnesota
  • BP asked to boost output from Iraq
  • Big Oil scores big contracts in Brazil
  • 180 million down, 160 million to go

ALBERTA

Suncor executive takes the top spot at Syncrude
Syncrude announced the retirement of CEO Mark Ward effective December 11, 2017. Ward is a secondee from ExxonMobil and will be returning to his home state of Texas. The CEO will be replaced by Doreen Cole, who currently serves as Suncor’s Senior Vice President, Regional Maintenance and Reliability. Imperial Oil/ExxonMobil has been operating the Syncrude facility for the past 10-years under a management services contract that expires in November.

MEG makes progress at Christina Lake
In this week's Q3 update, MEG Energy says production at Christina Lake averaged just over 83,000 bbl/day, up from 72,450 in the second quarter but roughly unchanged from the same time last year. The company says output was hampered by adverse weather conditions and the tying in new wells, required as part of its eMSAGP Phase 2B optimization project. Q3 operating costs hit a record-low of $6.00 per barrel ($4.57 ex-energy), down from $7.42 in Q2. MEG says it remains on track to exit 2017 at about 86,000 to 89,000 bbl/day. Capital spending plans for the full year have been reduced from $590 million to $510 million due to efficiency improvements in the reservoir and optimization of the pad and process plant.

Imperial makes progress at Kearl
Imperial Oil says it's making progress on improving reliability at its flagship Kearl Oil Sands Mine. Kearl produced 182,000 bbl/day in Q3, reflecting a scheduled maintenance turnaround late in the quarter that took 23,000 bbl/day offline. Those figures are 14% better than the same time last year thanks to reliability improvements made to the mining and ore preparation side of the plant. The company says work to improve reliability across the entire facility will continue into the fourth quarter. Averaged over the first nine months of the year, Kearl produced 179,000 bbl/day of bitumen, up 6% from 2016. The mining facility has a nameplate capacity of 220,000 bbl/day. Bitumen realizations averaged $39.02/bbl for the third quarter (+29% y/y) and $37.82 for the first nine months of the year (+59% y/y). Operating costs for the mining operation were not disclosed.

Thermal output continues to grow at Husky
Husky Energy reported a 14% increase in its thermal bitumen production in the third quarter, averaging 117,700 bbl/day. Operating costs across its Lloyd, Tucker and Sunrise facilities averaged $10.54 per barrel. The company says construction is progressing at its 10,000 bbl/day Rush Lake 2 Central Processing Facility, while three other heavy oil thermal projects in the Lloydminster region on track to start production in 2020, adding another 30,000 bbl/day of production in total. Production at Tucker reached 24,000 bbl/day in Q3 and continues to ramp up towards its nameplate capacity of 30,000 bbl/day. Gross production at Sunrise averaged about 40,500 bbl/day of bitumen in the third quarter, with 10 well pairs producing oil and another four expected to begin production by the end of this year. Husky also submitted an application with the Alberta Energy Regulator to develop its McMullen Thermal Project, located 40 km southwest of the town of Wabasca, Alberta.

Record production at Surmont
ConocoPhillips reported record production at its Surmont facility this week, averaging 126,000 bbl/day in the third quarter (gross). Bitumen realization prices continue to improve, averaging almost US$20 per barrel so far this year and over US$24/bbl in Q3. Surmont is a 50/50 joint-venture with Total. The SAGD facility has a nameplate capacity of 150,000 bbl/day. The company also says it continues to progress appraisal activity at its Montney properties.

Train derails north of Edmonton
About 50 homes in Sturgeon Valley were evacuated earlier this week after 12 CN railcars derailed in Sturgeon County, spilling less than 100 litres of crude along the right-of-way of the rail line. Residents were later allowed to return to their homes. Alberta Environment says no water bodies or wetlands were impacted. No injuries were reported and the cause of the derailment is still under investigation.


CANADA

Municipal bureaucracy at its best
Kinder Morgan Canada is asking the National Energy Board (NEB) to intervene in its spat with the city of Burnaby. The company accuses the municipality of stalling on its issuance of permits required to progress construction on its Trans Mountain Expansion project (TMEP). Burnaby's mayor in turn accuses the company of exerting pressure to speed up permit approvals. Mayor Corrigan says he's not involved in the regulatory process and denies deliberately slowing permit approvals. TMEP goes through several Burnaby parks, terminating at the Westridge Terminal. The city of Burnaby is one of several BC municipalities that have mounted a legal challenge against construction of the pipeline. Kinder Morgan has already warned the in-service date for TMEP will likely slip 9 months to the fall of 2020.

Irving pleads guilty and closes a chapter
Irving Oil pleaded guilty to 34 counts under the Transportation of Dangerous Goods Act related to the Lac Mégantic disaster in July 2013. Investigators concluded that Irving failed to properly classify the crude being transported by rail, which contained light Bakken crude from North Dakota and was found to be more flammable than the labelling suggested. Federal prosecutors acknowledged that the misclassification did not contribute to or cause the accident. Irving has been ordered to pay $4 million for the offences and says they take the charges "very seriously," and have worked to improve procedures and systems related to the transportation of dangerous goods.

Power outage sparks incident in Montreal East
A power outage last Tuesday morning forced an emergency shutdown of Suncor's 137,000 bbl/day Montreal East refinery. The shutdown resulted in a rather large flare, spewing black smoke for about an hour. Local media reported an explosion later in the afternoon. The fire was quickly extinguished and no injuries were reported.

Canadian institution gets sold to Chinese government
One of Canada's largest construction firms, Aecon Group, has agreed to be purchased by China's CCC International Holding (CCCI) for $1.45 billion in cash. The 140-year old company had put itself up for sale earlier this year after it concluded it was unable to grow its business, blamed in part on weak spending in the energy patch. Mining and energy make up about two-thirds of the company's revenues. Aecon says business in Canada will continue as usual, with no immediate changes to management structure or job losses. The takeover is subject to approval by the federal government under the Investment Canada Act. CCCI is a subsidiary of state-owned China Communications Construction Company, one of the world's largest engineering and construction companies. Prime Minister Trudeau says Canada is open for business and is unlikely to block the takeover.

SNC scores Chevron contract
Montreal-based SNC-Lavalin has signed a Master Services Agreement with Chevron for systems completion support on Chevron’s major capital projects worldwide. The scope includes providing resources to support planning and execution of systems completions, management of custody transfer and confirming the facility is ready for start-up. Terms of the deal were not disclosed.

Another province adds carbon tax - Part 1
New Brunswick Premier Brian Gallant announced plans to introduce carbon pricing to his province to help combat climate change. The premier says he hopes industries will pay their "fair share" or work to reduce emissions. Irving Oil expressed concerns the new tax will put the company at a competitive disadvantage, since 80% of its sales are to US customers. A spokesperson for Irving says the company remains "committed to working with all levels of government on a plan that protects the environment while also maintaining competitiveness for New Brunswick businesses."

Another province adds carbon tax - Part 2
The province of Manitoba announced plans to add a $25/tonne carbon tax, adding about 5¢/L to the price of gas and costing the average family $356/year. The rate will remain unchanged despite a federal government mandate to raise the tax to $50/tonne by 2022. The Manitoba government says a $50 carbon price would "impose an intolerable financial burden on Manitoba families and businesses." Premier Brian Pallister says his province has worked hard to reduce carbon emissions, mainly in the form of new investment in hydroelectric power, dropping emissions by an estimated 1 megatonne over the next 5 years. Proceeds from the tax will be redistributed to low-income families and used for spending on green initiatives. The "Made-in-Manitoba Climate and Green Plan" has been released to the public for review and comments.


USA

Enbridge's Line 3 hearings postponed in Minnesota
Minnesota's Public Utilities Commission has cancelled two public hearings into Enbridge's Line 3 replacement project scheduled for this week due to "logistical and safety issues." Several protestors held demonstrations in St. Paul last week, both in protest and in support of the line. The PUC says the hearings will be rescheduled for a later date.

Booming petrochemicals output from the Gulf Coast
LyondellBasell announced plans to build a US$2 billion chemicals and plastics plant somewhere in the Gulf Coast, most likely in the Houston area. The petrochemicals plant would use propane to make chemicals and polypropylene, serving North and South American markets. CEO Bob Patel says a final investment decision is still about 12 months away. The company is already building the world's largest propylene oxide and tertiary butyl alcohol plant, also in the Houston area, at a cost of US$2.4 billion.

TransCanada raises pipeline tolls to Texas
TransCanada has asked US federal regulators for permission to raise tolls for light oil transport on its Marketlink pipeline that runs from Cushing, OK to Port Arthur and Houston, TX. If approved, the toll would go from US$2.50 to US$3.00 a barrel starting December 1, 2017. Tolls for heavy oil transport remain unchanged at US$3/bbl.


US PRODUCTION & INVENTORY DATA

Gasoline and distillate stockpiles saw huge drawdowns this week, falling 5.5 and 5.2 million barrels, respectively. Gasoline imports shrank by almost two-thirds, falling to just 233,000 bbl/day, while exports rose over 40% to 906,000 bbl/day. Crude production has largely recovered from the effects of Hurricane Nate, returning to 9.5 million bbl/day last week.

Rig counts in the US increased by 1 this week, the first gain in four weeks. In Canada, the number of oil rigs declined by 11 to 96.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

OCT 25, 2017

US EXPORTS SURGE HIGHER WHILE PRODUCT INVENTORIES SEE MASSIVE DRAWDOWNS

 

AROUND THE WORLD

Naphtha leak in Norway
Norway’s Petroleum Safety Authority is investigating a naphtha leak that occurred at Statoil’s 240,000 bbl/day Mongstad refinery earlier this week. The leak forced a temporary evacuation of the facility and has curtailed gasoline production. A company spokesperson says the leak occurred in the refinery's cracker and no other units were affected.

Boosting output from Iraq
The government of Iraq has asked BP to boost production from its Kirkuk oil field in Kurdistan from the current 300,000 bbl/day to 700,000 bbl/day. Kirkuk is one of the biggest and oldest oilfields in the region, estimated to contain around 9 billion barrels of recoverable oil. The field was taken over by Iraqi officials after the region voted for independence in late September.

Exxon plows another US$200 million in Argentina ...
The provincial government of Neuquen in Argentina has approved ExxonMobil's investment plan for the development of a 35-year unconventional exploitation concession in the Los Toldos I South block. The company will make a US$200 million initial investment in the form of a pilot project that will include seven production wells, a production facility and export infrastructure. ExxonMobil's investment in Argentina's Vaca Muerta block has exceeded US$500 million so far. The government says they are "actively analyzing additional opportunities to accelerate gas production in other blocks and look forward to making further progress."

... and doubles-down in Brazil
A consortium consisting of Statoil, ExxonMobil and Brazil's Petrogal was awarded a production sharing contract for the Carcara North oil field block, located in 200 miles offshore Rio de Janerio. Exxon also announced the addition of another 1.25 net acres through the purchase of Statoil's interest in the Carcara field for an upfront payment of US$800 million and contingency payments worth up to US$1.3 billion. Exxon has added 14 blocks offshore Brazil this past month totalling more than 1.4 million net acres. Carcara is estimated to hold 2 billion barrels of recoverable "high-quality" oil. 

PetroBras plays "Let's Make a Deal"
Brazil’s Petróleo Brasileiro (aka PetroBras) has asked the country's environmental enforcement agency to wipe out all its unpaid environmental fines in exchange for providing environmental protection services. The company did not disclose how much money is owed to the government or how much "environmental protection" it would take to eliminate their fines. Brazil's government has already approved the conversion and says the deal will increase "investment in environmental projects." PetroBras also lost a US$2.8 billion tax ruling in Brazilian courts this week.

180 million down, 160 million to go
Speaking at an investment conference in Riyadh this week, Saudi Energy Minister Khaled al-Falih says he remains "flexible" and open to all options in order to bring global inventories down towards the 5-year average. The minister says OPEC's production pact has helped reduce global inventories by 180 million barrels so far, but another 160 million are needed to declare victory.


NEXT WEEK'S EVENTS

Monday:

Tuesday:

  • September Raw Materials & Producer Price Index released by StatsCan @ 8:30am
  • August GDP by industry released by StatsCan @ 8:30am
  • Q3/2017 earnings: Devon Energy, BP, NuVista Energy
  • Last trading day for November gasoline and December Brent contracts.

Wednesday:

Thursday:

  • EIA Weekly Natural Gas Storage Report released @ 10:30am ET
  • Q3/2017 earnings: Cenovus, CNRL, Enbridge, Pembina Pipeline, Royal Dutch Shell, Athabasca Oil Corp, Advantage Oil & Gas, Baytex Energy, Bonavista Energy, Crew Energy, Gran Tierra Energy, Seven Generations and EOG Resources.

Friday:

  • September Trade balance released by StatsCan @ 8:30am
  • October Labour Force Survey released by StatsCan @ 8:30am
  • Baker Hughes Rig Count released @ 1:00pm ET
  • Q3/2017 earnings releases: TORC Oil & Gas
The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

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