The Oil Sands Weekly

The Oil Sands Weekly

IN THE NEWS THIS WEEK:
  • Investor's await first barrel of crude from Fort Hills
  • BlackGold SAGD facility comes back to life
  • Alberta lays charges against Nexen
  • Mackenzie pipeline dealt a final blow
  • SNC scores contract for modularization studies
  • CN's plan for safer crude-by-rail transport
  • Drilling resumes in Alaska's Beaufort Sea
  • Oil prices spike on bombing of Libyan pipeline
  • Chinese accused of selling crude to North Koreans.

ALBERTA

All eyes on Fort Hills as 2017 draws to a close
Suncor Energy is an awkward spot this week after it promised investors it's newly constructed Fort Hills mine would produce its first barrel of oil before the end of December. Suncor says it has conducted five test runs on its primary extraction facility so far, produced 1.4 million barrels of bitumen froth, which has been trucked to Suncor's base plant for further processing. A spokesperson for the company says progress on the mega-project is "excellent" and work is now largely focused on "supporting commissioning activities." In order to produce its first barrel of bitumen, the plant's secondary extraction facility needs to be put into service, which is the last section of the plant to be commissioned. The $17 billion mine is expected to ramp up to 194,000 bbl/day by the end of next year.

BlackGold SAGD facility revived
Harvest Operations confirmed the restart of commissioning at its BlackGold SAGD facility, located about 150 km south of Fort McMurray. The $900 million facility was mechanical complete at the end of 2015 when the company shelved the project due to low oil prices. Harvest says it now sees signs of "stabilization" in oil prices, allowing it to restructure its debt and secure new financing. Phase 1 is expected to produce 10,000 bbl/day, but the project has regulatory approvals in place for up to 30,000 bbl/day of output. The company says it is preparing for steam injection early in 2018 with first oil expected in Q3. Harvest Operations is a wholly-owned subsidiary of Korea National Oil Corp.

Province lays charges against Nexen
Alberta's Labour Ministry has charged Nexen with 8 counts of safety violations under the Occupational Health and Safety (OH&S) Act in the death of two maintenance workers in 2016. The two employees were refitting the valves on a hydrocracker unit at the Long Lake upgrader, when the incident occurred. An investigation concluded that the company failed to properly maintain its gas compressor and workers were not adequately trained for the tasks they were executing. The company had argued the two men were working outside the scope of their approved work duties. The Long Lake upgrader, located 40 km south of Fort McMurray, has since been idled. Nexen is due to appear in court on February 14, 2018.


CANADA

A more certain outcome for pipeline reviews
Prime Minister Justin Trudeau has tasked his ministers with coming up with new rules for vetting all major development projects in the new year, aimed at improving "predictability, timelines and certainty" in order to increase "public confidence among Canadians in the regulatory framework." Natural Resources Minister Jim Carr acknowledged that both producers and investors would benefit from a "more predictable" system, particularly in reference to new pipeline construction.

SNC scores Shell contract
Montreal-based SNC-Lavalin announced the signing of a new agreement with Shell to provide pre-feasibility and feasibility studies for modularization options on Shell’s oil and gas projects. The work will be executed from three SNC offices in Singapore, Houston and Dubai.

Piloting a safer crude-by-rail option
CN Rail has partnered with the Alberta government and Toyo Engineering to further develop its CanaPux™ technology, a solid bitumen brick designed to be transported by rail. CanaPux™ are solid, dry pucks of bitumen wrapped in a layer of polymer. The pucks do not dissolve or combust easily, reducing the risks of crude-by-rail transport, which usually requires large volumes of flammable diluent. The solid pellets will also hopefully be exempted from the federal Liberal's crude tanker moratorium off the northern coast of BC. Toyo will design and build a pilot plant capable of solidifying and re-liquefying up to 1,000 bbl/day of bitumen. CN patented the technology earlier this year jointly with Alberta Innovates and says it is still exploring licensing options for the bitumen bricks. Both CN and Toyo plan to eventually open a presentation centre for interested shippers, commercial partners and key stakeholders.

Mackenzie Pipeline dies a final death
Imperial Oil and its partners have officially dissolved the Mackenzie Gas Project consortium, 18 years after the project was first initiated. The project would have connected massive gas reserves in the Mackenzie Delta to markets in the south. At last estimates, the 1,842 km pipeline had a price tag of about $20 billion, making it one of the largest mega-projects in Canadian history.  After a decade of negotiating with communities along the right-of-way and a six-year regulatory review process, the National Energy Board approved the project in December 2010 and granted the partners an extension to begin construction as late as 2022. However, a collapse of natural gas prices, brought on by skyrocketing production from US shale, made the project economically unfeasible. The Mackenzie consortium included Exxon Mobil, ConocoPhillips and the Aboriginal Pipeline Group (APG), made up of several First Nations communities in the Northwest Territories. Imperial VP Theresa Redburn called the decision "a disappointing day for the people of the North ... Imperial and the other members of the joint venture."


USA

EPC consolidation in Texas
Texas-based EPCs McDermott International and CB&I announced a US$6 billion merger, creating a "vertically integrated onshore-offshore EPCI company" with combined revenues of about US$10 billion and a project backlog of US$14.5 billion. CB&I's portfolio is primarily focused in the US, while McDermott has a significant presence in the Middle East and Asia. The transaction includes CB&I’s Technology business, which includes 3,000 patents and over 100 licensed technologies. Upon closing of the deal, McDermott shareholders will own 53% of the new company, with CB&I shareholders owning the remaining 47%.

Italians return to Alaska's Beaufort Sea
According to US regulators, Italian energy major Eni will begin drilling in Alaska's Beaufort Sea, a first since 2015. The project is in partnership with Royal Dutch Shell and includes plans to drill two exploration wells plus two sidetrack wells, producing as much as 20,000 bbl/day. The company will be working from an artificial island about 5 km off Oliktok Point in the Arctic Ocean, where it already has existing production facilities. Last April, President Trump signed an executive order to extend offshore drilling to areas in the Arctic that were previously off limits. Government officials say developing oil and gas reserves in the Arctic is a "critical component to achieving American energy dominance."


US PRODUCTION & INVENTORY DATA

Refinery utilizations rates jumped to almost 96% last week, further reducing crude inventories and adding to product stockpiles.

 
us-inventory-report.jpg

WEEKLY US INVENTORY REPORT

DEC 28, 2017

CRUDE STOCKPILES CONTINUE TO FALL AS US REFINERIES RUN FLAT-OUT INTO CHRISTMAS BREAK

 

AROUND THE WORLD

Another pipeline gets taken out of service
Brent crude prices spiked above US$60 a barrel earlier this week after one of Libya's most critical pipelines was bombed by unnamed militants, disrupting exports from the country's largest export terminal. Libya’s production declined to 950,000 bbl/day this week, down from 1.08 million before the incident. The pipeline, a joint-venture between Libya’s National Oil Corp, Hess, Marathon Oil and ConocoPhillips, is expected to be down for repairs over the next several weeks. Earlier this month, Libya struck a deal with OPEC to cap its production at 1 million bbl/day.

Another pipeline returns to service
Pipeline operator Ineos says it has completed repairs on its 575,000 bbl/day Forties pipeline in the UK, lifted restrictions on oil and gas flows from the North Sea. The line is slowly returning to service and expected to be operating at normal rates around New Year's Day. Fortis is the most critical piece of infrastructure for Brent crude flows.

Chinese accused of selling crude to North Koreans
The Chinese government is being accused to selling crude to North Korea, violating sanctions imposed by the UN Security Council. The crude was offloaded off the coast of South Korea in a ship-to-ship exchange captured by US reconnaissance satellites. The UN recently imposed a fresh batch of sanctions on North Korea, capping diesel and kerosene deliveries to 500,000 barrels and crude oil to about 4 million barrels annually starting in 2018.


NEXT WEEK'S EVENTS

Monday:

  • Cdn/US markets closed for New Year's Day

Tuesday:

Wednesday:

Thursday:

Friday:

  • December Labour Force Survey released by StatsCan @ 8:30am
  • 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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