Page 7 - NorthAmOil Week 16

NorthAmOil COMMENTARY NorthAmOil
warnings that if pressure and temperature are not maintained, reservoir damage may occur, negatively affecting future production.
“Shutting down those [operations] sounds a lot easier than it actually is,” Alberta Premier Jason Kenney told reporters in mid-April. “It can cause permanent damage to their reservoir and jeopardise billions of dollars of assets.”
Nonetheless, curtailments are looming as oil prices continue to sink, and there is added pressure on industrial operations as employers take steps to reduce the spread of coronavirus (COVID-19). Indeed, it is thought that even larger Canadian production cuts are coming, including at SAGD operations. However, oper- ators may have to keep a certain minimum level of production online in order to avoid reservoir damage.
This is in line with what ConocoPhillips is doing. The company’s reduction at Surmont represents the lowest level to which output there can fall without resulting in reservoir damage.
“We’re not going to shy [from restoring pro- duction] if we see any risk to reservoir damage or anything that’s going to impair our ability to bring it back,” ConocoPhillips’ chief operating officer, Matt Fox, told analysts.
And Reuters cited a Cenovus spokes- woman, Sonja Franklin, as saying the company was confident that it could safely adjust pro- duction at its SAGD operations, as it had done so previously.
What next?
The lower the oil price goes the more oil sands producers will have to cut back volumes, and currently there is no relief in sight. WCS is priced at a discount to average monthly US crude futures, which shields the grade from daily fluc- tuations and has protected it to an extent in the immediate aftermath of WTI’s collapse. How- ever, expectations for oil prices on both sides of the border are increasingly bearish.
On the mining side of the industry, not all producers are as determined as CNRL to keep operations going. The Suncor Energy-led Fort Hills mine, which has a capacity of up to 190,000 bpd, has been reduced to a single-train opera- tion from three trains normally at the project’s secondary extraction unit. Reuters cited a Tudor Pickering Holt & Co. (TPH) upstream analyst, Matt Murphy, as estimating that around 85,000 bpd of output had been cut at Fort Hills.
Meanwhile, Imperial Oil has said that if nec- essary, it would prioritise curtailing output at its Kearl mine, because production there can be modulated more easily than at the company’s Cold Lake SAGD site.
Consultancy Rystad Energy said on April 20 that 1.14mn bpd of oil sands output had already been shut in this month so far. The consultancy expects a further 960,000 bpd of Canadian crude to go offline over the remainder of the quarter, putting the country in the lead globally in terms of shut-ins.™
On the mining side of the industry, not all producers are as determined as CNRL to keep operations going.
Mining projects are not immune to the slump, and Suncor’s Fort Hills is among those to cut production.
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