Maintenance at oil-sands mines may achieve what Alberta’s mandatory production curtailments have so far failed to accomplish: drain Western Canada’s storage tanks.
Inventories in the region were 34 million barrels the week before last, Richard Kruger, Imperial Oil Ltd.’s chief executive officer, said in an earnings call Friday, citing Genscape data. That figure is little changed from when Alberta’s outgoing government announced mandatory production cuts at the beginning of December to alleviate a glut.
While inventories did fall initially to about 28 million barrels in February, they started to rise again after the price of heavy Canadian crude strengthened to within $10 of West Texas Intermediate futures, making it uneconomic to ship by rail, the one alternative to clogged pipelines.
“This could be a time when production wanes and inventories come down,” Kevin Birn, IHS Markit’s director of North American crude oil markets, said by phone.
Heavy Canadian crude prices have weakened a bit this month, with Western Canadian Select’s discount to futures widening to $13 a barrel Tuesday. The wider gap has facilitated more rail shipments, which will rise to between 165,000 barrels and 175,000 barrels a day in April from 150,000 in March, Imperial’s Kruger said.
“We think some of the major spring maintenance activities, particularly at the mines, may help to alleviate some of the pressure over the next couple of months,” Kruger said Friday.
Below is a list of some of the planned oil sands maintenance this spring and summer:
Imperial is planning about 32 days of work at the K2 facility at its 220,000 barrel-a-day Kearl mine starting in mid-May, affecting about 50,000 barrels a day of production Imperial started 36 days of maintenance on its 160,000 barrel-a-day Cold Lake site last week, with the work affecting 13,000 barrels a day during the second quarter Devon Energy Corp. will start several weeks work at its 120,000 barrel-a-day Jackfish site in mid-May, affecting second quarter output by about 15,000 barrels a day Cenovus Energy Inc. started 23 days of maintenance at its 210,000 barrel-a-day Christina Lake site last week, with the facility back to normal by mid May Syncrude Canada Ltd. will shut the 8-1 coker, one of three at the oil sands upgrader, during the third quarter, according to Imperial, a Syncrude shareholder Suncor Energy Inc. plans second-quarter maintenance: Firebag oil-sands site work will affect about 30,000 barrels a day of production U1 upgrader maintenance will affect 25,000 barrels a day Fort Hill oil-sands mine work will affect 15,000 barrels a day