The Oil Sands Weekly

The Oil Sands Weekly

IN THE NEWS THIS WEEK:
  • Upgrader hiccups cut SCO production
  • ATB moderately bullish on Alberta's outlook
  • South Africa's Sasol puts Montney assets up for sale
  • BC makes first LNG shipment to China
  • TransCanada gets green light on Keystone XL ...
  • ... but not the route it wanted
  • Keystone leak widens heavy oil discount ...
  • ... but boosts WTI price
  • UK offers tax breaks in the North Sea
  • Statoil's latest attempt to clear their conscience
  • Exxon breaks records in Sakhalin
  • Big Oil team up to tackle methane emissions
  • All eyes on OPEC next week as hopes run high for extension of production cuts.

ALBERTA

Two upgraders report reduced rates
Both Shell and Syncrude are warning customers that November's synthetic crude output will be dented due to unplanned upsets at their respective upgraders. Production at Shell's 255,000 bbl/day Scotford Upgrader was taken offline this week due to a leaky valve, cutting production through the end of the month and potentially into December. Syncrude's 350,000 bbl/day Mildred Lake upgrader has also warned customers that SCO shipments will be about 5% below normal for the next few weeks.

An update on Great Divide
Connacher's Great Divide in-situ operation reported third quarter production of 12,812 bbl/day, bringing the year to date average to about 12,300 bbl/day. Operating costs were reported at just over $18/bbl (including energy), improving netbacks to $10.67 per barrel of bitumen. Great Divide is split into Pod One and Algar, consisting of 41 well pairs. After being taken offline last year due to low oil prices, all 41 well pairs were put back into production this past spring. Connacher has been under creditor protection since the spring of 2016.

Titanium Corp locks in financing on CNRL pilot project
Titanium Corporation announced full funding for its $10.2 million CVW™ project, with Emissions Reduction Alberta (ERA) covering 50% of engineering costs, to a maximum of $5 million. The company will kick-in $1.5 million of its own funds while sponsor Canadian Natural Resources (CNRL) has committed up to $3.7 million. CVW™ is designed to recover bitumen and solvent from Froth Treatment tailings, preventing the hydrocarbons from entering the tailings pond and releasing VOCs and greenhouse gases. Front-end engineering (FEED) is expected to start in early 2018 and last for about 12-months. The pilot will be installed at CNRL's Horizon Mine and is expected to be operational by 2021. Results will be shared with other oil sands mine operators via Canada's Oil Sands Innovation Alliance (COSIA).

ATB moderately bullish on Alberta's outlook
In its November Alberta Economic Outlook, ATB Financial says the province's economy is "gaining momentum" despite sluggish employment growth. Higher oil prices are expected to help the energy sector expand next year, while housing, retail sales and tourism remain as bright spots in the economy. The bank still expects more Albertans to leave for other provinces in search of work next year, but at a much slower rate than the past two years. After contracting in 2015 and 2016, real GDP is expected to slip from 3.9% this year, to 2.7% next year and 2.2% in 2019.


CANADA

BC ships first LNG shipment to China
The province of BC announced Canada's first LNG shipment from the Port of Vancouver to China this week. The LNG was supplied from FortisBC's Tilbury LNG facility in Delta while logistics and equipment were provided by True North Energy and China's CIMC ENRIC Holdings Ltd. The relatively small shipment of 950 GJ (about 17 tonnes of LNG) was transported to Asia by container, not tanker. FortisBC has been liquefying natural gas at Tilbury since 1971 for supply to the Lower Mainland during periods of high demand and more recently to remote communities and heavy-duty vehicle fleets. Tilbury is currently undergoing an expansion to boost capacity to 250,000 t/year.

Sasol puts Montney assets up for sale
South African energy major Sasol announced plans to exit its Canadian shale holdings, calling the assets non-core. Sasol purchased the Montney assets in northeastern BC from Talisman Energy in 2013 for $1.5 billion. The properties are jointly held with Progress Energy, subsidiary of Malaysia's Petronas. The company says it will begin a "a structured divestment process" with its partner. Sasol took a US$715 million impairment charge on the assets last year and is expected to take additional write-down post-sale.


USA

9 years, 2 months and 1 day later
Nebraska's Public Service Commission has voted 3-2 in favour of approving Keystone XL through its state. The approval applies to the Alternative Mainline Route and not the shorter Preferred Route. The state estimates it will generate US$200 million in tax revenues from construction and Keystone XL's first 15 years of operation. Keystone XL is designed to transport 830,000 bbl/day of crude from Alberta into the Gulf Coast for refining and export. About 100,000 bbl/day of capacity is reserved for light Bakken crude from North Dakota. TransCanada has yet to make a final investment decision on the project but is expected to make an announcement at its Investor Day meeting in Toronto next week.

TransCanada digs up Keystone, and that can't be good news for shippers
TransCanada is warning customers that deliveries on its 590,000 bbl/day Keystone pipeline will be reduced by at least 85% through the end of November, as it works to repair the line after a buried section of pipe leaked about 5,000 barrels of crude in Marshall County, South Dakota last week. Clean-up and soil remediation continues on-site and the affected section of pipe has since been excavated. Keystone has been in service for about 10 years but was designed for a 100-year service life. A preliminary report on the cause of the leak is expected before the end of month. Outage of the pipeline has widened the heavy oil discount from about US$14/bbl pre-spill to almost US$17 as some speculate the line could be down for several more weeks.


US PRODUCTION & INVENTORY DATA

US oil rig counts increased by 9 to 747 while the number of Canadian rigs in service declined by 2 to 107.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

NOV 22, 2017

CRUDE OIL INVENTORIES SEE BIG DRAWDOWNS IN GULF COAST AND MIDWEST AHEAD OF KEYSTONE SHUTDOWN

 

AROUND THE WORLD

Teaming up on methane emissions
A group of eight oil majors, including BP, Exxon Mobil, Royal Dutch Shell, Total, Respol and Eni have teamed up to tackle methane emissions from natural gas production, including venting, fugitive emissions and improving combustion efficiency. The International Energy Agency estimates that global oil and gas operations produce 76 million tons of methane annually, equivalent to the GHG emissions of all coal-fired power plants in China.

UK offers tax breaks in the North Sea
Britain's finance minister announced plans to offer more incentives for producers operating in the North Sea. The government has offered to cover 40% of costs for decommissioning wells, platforms, pipelines when the field reaches the end of its life. The tax relief is now transferable from seller to buyers. Oil and gas firms are expected to spend US$78 billion through 2050 decommissioning old wells in UK's North Sea.

Statoil's latest attempt to clear their conscience
Statoil CEO Eldar Saetre tells Reuters there's "good" oil, and there's "bad" oil, noting that his company will be focused on "accessing the most carbon-efficient barrels" while the world awaits a future free of fossil fuels. The company says it will no longer be investing in heavy oil or the oil sands, preferring instead light oil fields closer to home, in the US and off the coast of Brazil. According to the USGS, about 70% of the world's oil reserves are heavy and unconventional, the largest deposits being Venezuela's extra heavy oil in the Orinoco Belt and Alberta's oil sands.

Bolivia expands natural gas production
Bolivia’s government has signed a US$1.6 billion natural gas development deal with Petrobras, Repsol, Royal Dutch Shell and a subsidiary of BP. Bolivia’s state-run YPFB will participate in all the projects, which include investment in the Iniguazu, San Telmo Norte and Astillero fields. Bolivia's natural gas production has been in decline in recent years but the country's president hopes foreign investment could add about 21 MMcf/day of output as early as 2020.

Turmoil continues in Venezuela
Venezuela continues to negotiate financing with the world's largest oil majors and service firms as it desperately tries to reverse declines in crude production. October's output fell below the 2 million bbl/day mark for the first time in 30 years as both the country and state-owned PDVSA struggles to pay back creditors. Both China and Russia have extended the OPEC member a lifeline in oil-for-loans agreements. Venezuelan officials say they hope to increase output by 500,000 bbl/day next year.

Iran gives Total ultimatum and prepares Plan B
Iran's oil minister is threatening to pull the plug on Total after the French oil major said it would review its investments in the South Pars gas field if the US reinstates sanctions on Iran over the country's nuclear program. Total signed an agreement with Iran last summer to develop phase 11 of South Pars with an initial investment of US$1 billion. The company says it remains committed to the project and expects to begin awarding contracts in the new year. Iran is also offering enticing price discounts to Asian customers, particularly Japan and India, to secure market share in case sanctions are reinstated. The US Congress is expected to make a decision on Iran sanctions by mid-December.

Lots of interest in Iraq
BP and Eni have expressed interest in developing Iraq's massive Majnoon oil field. Chevron and Total have also expressed interest in the field, after Royal Dutch Shell announced plans to exit next year and hand the facility over to the Iraqi government. Both BP and Eni have extensive operations in Iraq.

Russia secures top spot as China's crude supplier
Russia's Rosneft has agreed to supply CEFC China Energy with nearly 61 million metric tons of oil over the next five years (roughly 235,000 bbl/day), further strengthening energy links between the two countries. The deal will help Russia's position as China’s largest oil supplier, overtaking Saudi Arabia.

Breaking records in Sakhalin
Rosneft reported the completion of a record-breaking 15,000 meter horizontal well from its Sakhalin-1 Orlan platform in the Sea of Okhotsk. Sakhalin-1 has drilled 9-out-of-10 of the world's longest oil wells. The project is operated by a Russian subsidiary of ExxonMobil.

All eyes on Vienna next week
Reuters is reporting that Saudi Arabia will seek a 9-month extension to its agreed production caps, which currently expire in the spring of 2018. The Russians are sending mixed signals on the deal, aimed at reducing global inventories closer to their 5-year average. A path forward is expected to be announced next week during OPEC's "ordinary" meeting on November 30. Veteran crude trader Andy Hall will also be in attendance, providing the cartel with his view on growing supply out of the US. Saudi and Qatari officials are still barred from speaking to each other due to an on-going dispute over state-sponsored terrorism.


NEXT WEEK'S EVENTS

Tuesday:

Wednesday:

Thursday:

Friday:

  • September & Q1/2017 GDP released by StatsCan @ 8:30am ET
  • November Labour Force Survey released by StatsCan @ 8:30am ET
  • Trans Mountain Expansion detailed route hearings in Spruce Grove, AB
  • Baker Hughes Rig Count released @ 1:00pm ET
The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

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