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Oil Sands Production Cut after Natural-Gas Line Ruptures

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Reuters

CALGARY, Alberta, Oct 17 (Reuters) - Some of Canada's largest oil sands producers began scaling back production on Thursday after their natural gas supplies were cut back due to a pipeline rupture on TransCanada Corp's regional Nova pipeline network.

Suncor Energy Inc said it is slowing operations at its oil sands projects north of Fort McMurray, Alberta, where production averaged 365,000 barrels per day last month.

The 350,000 bpd Syncrude Canada Ltd oil sands project also has suspended shipments while Canadian Natural Resources Ltd ramped-down production at its 115,000 bpd Horizon oil sands project and at its Woodenhouse heavy oil operations.

TransCanada on Thursday said the 1.6 billion cubic foot per day North Central Corridor pipeline ruptured in a remote area about 140 kilometers (87 miles) west of Fort McMurray, Alberta.

The rupture cut critical supplies of gas to oil sands operators, who need the fuel to produce bitumen and for the upgraders that convert it into refinery-ready synthetic crude.

Canadian cash crude prices strengthened after TransCanada issued its warning. Western Canada Select heavy blend for November delivery was last trading at $26.50 per barrel below the West Texas Intermediate benchmark, according to Shorcan Energy brokers.

That compares with a settlement price of $30.00 per barrel, below the benchmark on Wednesday.

Light synthetic crude from the oil sands for November delivery strengthened to $9.50 per barrel below WTI, compared with Wednesday's settlement price of $10.60 under the benchmark.

The line break has not affected all operators in the region. Royal Dutch Shell Plc said its Albion oil sands mine was operating normally. Cenovus Energy Inc said its Foster Creek and Christina Lake oil sands projects were operating as usual and Imperial Oil Ltd said its 110,000 bpd Kearl oil sands mine was also unaffected by the rupture.

The North Central Corridor line, built in 2010, is part of TransCanada's Nova regional natural gas pipeline system.

Copyright 2014 Thomson Reuters. Click for Restrictions.

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