ExxonMobil Unit Shuts Oil Sands Mine After Pipeline Spill

ExxonMobil Unit Shuts Oil Sands Mine After Pipeline Spill
ExxonMobil's Imperial Oil shut down its oil-sands mine after a spill from a pipeline that supplies diluent to the operation.

(Bloomberg) -- Exxon Mobil Corp.’s Imperial Oil shut down its oil-sands mine after a spill from a pipeline that supplies diluent to the operation, adding to the woes of Canada’s beleaguered energy industry.

Imperial announced the ramp-down of its Kearl mine in northern Alberta on Wednesday, following a leak Saturday that led Inter Pipeline Ltd. to shut the west segment of its 240,000-barrel-a-day Polaris system. The diluent Polaris supplies to sites operated by Imperial and Husky Energy Inc. is mixed with the sticky bitumen they produce, so that it can be shipped by pipeline.

The disruption is just the latest blow to Canadian crude producers that had been struggling with a lack of pipeline infrastructure and competition from shale before the Covid-19 pandemic slashed demand from the U.S. refineries they supply.

The Western Canadian Select crude benchmark for October delivery strengthened relative to West Texas Intermediate. Its discount to the U.S. benchmark has narrowed by $1.40 a barrel over the past two days to $9.40. Before Tuesday, the gap hadn’t fallen below $10 since Aug. 17, NE2 Group data show.

Imperial said the Kearl mine is ready to ramp up to full production rates once diluent supply is restored, and it’s pursuing steps to try to mitigate the impact of the outage.

There was still no estimate for a restart of the impacted segment of the Polaris system. The east segment of the pipeline, which supplies some other oil-sands sites, is fully operational, Inter Pipeline said.

What Bloomberg Intelligence Says:

The leak in the Polaris diluent pipeline forced oil sands production to halt at a time producers are already struggling with weak margins and stretched balance sheets. Imperial Oil, 70% owned by Exxon Mobil, was forced to close its Kearl mining project in northeast Alberta Province that produces over 270,000 barrels a day. Husky, BP and Cenovus could also see effects on production and costs.

-- Fernando Valle and Talon Custer, BI analysts

Husky, operator of the Sunrise oil-sands site, has been affected by the pipeline shutdown, “however, we have other options to help mitigate the effects,” spokeswoman Dawn Delaney said Tuesday.

Inter Pipeline is working to dig up the line, Shawn Roth, a Alberta Energy Regulator spokesman, said Tuesday. New booms have been deployed and wildlife containment measures taken. The site is difficult to access but a helicopter and vehicles have reached the location, he said.

© 2020 Bloomberg L.P.


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