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Canada Crude Falls Below $30; BMO Seeks Oil Sands Cost Cuts

(Bloomberg) — Canadian heavy oil prices fell below $30 for the first time in more than six years as Bank of Montreal warned that oil sands producers must cut costs. Western Canadian Select fell 59 cents to $29.85 at 12:28 p.m. Mountain time, the lowest since Feb. 18, 2009, according to data compiled by Bloomberg. The grade’s discount to U.S. benchmark West Texas Intermediate narrowed 80 cents to $13.60 a barrel. Crude futures settled at a six-year low of $43.88 in New York on concern record supply may strain storage capacity. The cash costs of oil sands producers must shrink to remain competitive in the “new normal of lower oil prices for longer,” BMO analyst Randy Ollenberger said in a note today. The majority of Canada’s crude comes from oil sands in Northern Alberta and is among the most expensive to produce. Companies including Royal Dutch Shell Plc and […]

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Oil-Sands Rules Get Tougher as Alberta Seeks Less Damage

(Bloomberg) — Oil-sands producers will be forced to reduce waste water and to clean up and restore mined land within a decade as Alberta seeks to reduce environmental damage. Regulation announced by Alberta Environment Minister Kyle Fawcett in Edmonton on Friday, include limits on water withdrawals from the Athabasca River in the Canadian province’s north. Companies will also be required to slow the growth of tailings ponds, which hold waste water from bitumen mining, and restore land that existing ones are on after 10 years of the end of the mine’s life, the minister said. Oil-sands operators have come under attack for environmental impact including emissions of greenhouse gas and fresh-water use, helping to stall pipeline construction such as TransCanada Corp.’s Keystone XL. Production of bitumen, forecast to more than double by 2030, is Canada’s fastest-growing source of carbon emissions. The new rules are a more “realistic” policy framework […]

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Husky reports start of production from Sunrise oil sands project

Husky Energy Inc., Calgary, reported the start of production at the first of two 30,000-b/d plants at the in situ Sunrise Oil Sands Project in northeastern Alberta. Husky said it expects the project’s total production to ramp up its full 60,000 b/d capacity (gross) by yearend 2016. Steam operations for the project began in December 2014 ( OGJ Online, Dec. 12, 2014 ). Husky is the operator of Sunrise, which lies 60 km northeast of Fort McMurray, with equal working interest with BP PLC , which operates the jointly-owned BP-Husky Toledo refinery. Bitumen from Sunrise can be processed at that refinery. Sunrise contains estimated reserves of 3.7 billion bbl (440 million proved, 2.4 billion probable, and 860 million possible) as of Dec. 31, 2013. Husky has a 50% working interest in these reserves. 03/11/2015 Abu Dhabi Co. for Onshore Oil Operations (ADCO), through a subcontractor, has let a contract […]

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Shell Withdraws Application for New Canadian Oil Sands Mine

CALGARY, Alberta— Royal Dutch Shell PLC said Monday that it was indefinitely postponing plans to develop a proposed oil-sands surface mine in Western Canada, the energy company’s latest sign of retrenchment amid a drop in crude oil prices to six-year lows. The company said it would withdraw its regulatory application to the Canadian Environmental Assessment Agency for a 200,000-barrel-a-day oil project known as the Pierre River North surface mine in northern Alberta. That move followed Shell’s decision last month to cut up to 10% of its 3,000 oil-sands-related jobs. Shell was the first major energy company to shed workers in Canada’s oil patch in response to the recent swoon in global crude oil prices to half their levels in mid-2014. Since then, other large Canadian oil-sands producers have also slashed jobs. Like Shell, some have deferred longer-term projects, but most plan to finish construction of oil-sands projects already under […]

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Canada’s Oilsands Face ‘Death Spiral’ If They Don’t Cut Costs

As the world’s oil glut continues to build, wiping out hopes of a price recovery, the head of one of Canada’s largest oilsands operators is warning the industry faces a “death spiral” if it doesn’t figure out how to cut costs. Speaking before the Chamber of Commerce in Fort McMurray, Steve Laut, president of Canadian Natural Resources Ltd. (CNRL), said oilsands companies can still return to health, but only if they aggressively begin to cut costs. Costs have risen so far, so fast that oil producers were making three times as much profit in 2004, when oil was at $40 a barrel, than they were a few years ago when oil was at $100 a barrel, Laut said, as quoted at the Globe and Mail . Laut’s call for cost cutting may be seen by some as a prelude to layoffs and project cancellations, but so far North America’s […]

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Lower Oil Prices Strike at Heart of Canada’s Oil Sands Production

OTTAWA — For as long as 400-ton dump trucks have been rumbling around the open pit mines of Canada ’s oil sands , crews from Kal Tire have been on hand to replace and repair their $70,000, 13-foot diameter tires. But the relationship, going back over a decade, didn’t spare the company when oil prices began plummeting. Dan Allan, the senior vice president of Kal’s mining tire unit, said that customers immediately began looking for price concessions. Others asked Kal to withdraw personnel from some sites or swiftly canceled plans to add more maintenance crews. “We’re sort of caught at the sharp end of the spear,” said Mr. Allan, who is now looking to relocate some employees. “It’s really difficult.” Canada’s oil sands — and the 167 billion barrels of reserves — prompted an unprecedented expansion over the last decade. But the roughly $155 billion spending spree left the […]

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Suncor Executive Says Growth Plans Based on Bullish Crude Price Outlook

A senior Suncor Energy Inc. executive said Wednesday the company won’t delay its biggest long-term growth projects because it expects crude oil prices to double from current levels within the next three to four years. “In the longer term, oil is going to go back to $90-$100,” Alister Cowan, the oil sands producer’s chief financial officer, told investors attending a Canadian Imperial Bank of Commerce conference in Whistler, British Columbia, saying that prices would rebound to that level “probably in three years or four years’ time.” That bullish outlook echoes recent comments by CEO Steve Williams, who has said he also expects oil prices to climb back to the lofty levels of last summer. U.S. oil for March delivery traded on the New York Mercantile Exchange settled Wednesday at $47.78 a barrel. Oil prices have tumbled more than 55% since June, with the steepest decline following the Organization of […]

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Suncor Cuts Jobs, Spending as Oil Rout Rattles Canada

Suncor Energy Inc. (SU) , Canada ’s largest oil company, said it will cut 1,000 jobs, lower its 2015 capital budget by about 13 percent and delay projects to weather collapsing prices. The company will spend C$1 billion ($836 million) less this year than originally forecast in November, following Canadian Natural Resources Ltd. (CNQ) in revising its budget lower this week. Suncor also plans to reduce operating expenses by C$600 million to C$800 million in two years, according to a company statement today. “Cost management has been an ongoing focus, with successful efforts to reduce both capital and operating costs well underway before the decline in oil prices ,” Steve Williams , Suncor’s chief executive officer, said in the statement. “In today’s low crude price environment, it’s essential we accelerate this work.” The cuts are the latest blow to Canada’s energy industry and economy as plummeting prices reverberate in […]

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As Oil Slips Below $50, Canada Digs In for Long Haul

ENLARGE A machine works at the Suncor Energy Inc. mine near Fort McMurray, Alberta, on June 19, 2014. Bloomberg News CALGARY—In the escalating war of attrition among top oil-producing nations, Canada’s biggest oil-sands mines have a message for the market: Don’t look to us to cut production. Long the unloved stepchild of so-called unconventional crude production, the oil sands have lured some of the world’s top energy producers to a remote corner of Northern Alberta where the heavy oil deposits are richest. There, they have plowed billions of dollars into building up a sprawling industrial complex amid the surrounding forests. And even as oil prices settled below $50 a barrel Monday for the first time in nearly six years, those companies are unlikely to shut off the tap anytime soon thanks to those huge upfront costs, combined with long-term break-even points and lengthy production lives. Unlike shale oil, which […]

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Shell’s Canadian Oil-Sands Operations to Cut Jobs Amid Crude Oil Price Swoon

By Chester Dawson CALGARY-Royal Dutch Shell PLC said Friday it plans to cut jobs at its Canadian oil-sands operations, becoming the first major energy company to shed workers in Canada’s oil patch amid a recent swoon in global crude oil prices. Shell, which produces 250,000 barrels of oil a day from its oil-sands mines, will trim about 2% of its 3,000 workers, or about 60 positions, some of whom will be reassigned to other jobs, said company spokesman Cameron Yost. "We’re continuing to review our business to make sure that we remain competitive," Mr. Yost said. "When prices are low the importance of that is underlined," he said. The president of Shell Canada, Lorraine Mitchelmore, said in August that the company’s oil-sands business met internal yardsticks for profitability when Brent crude trades above $70 per barrel. Prices for Brent, the global oil benchmark, have spiraled lower in recent weeks, […]

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