Page 10 - NorthAmOil Week 28

NorthAmOil COMMENTARY NorthAmOil
restoring curtailed output. However, its impli- cations go beyond North Dakota’s Bakken play, and are causing jitters in Alberta, where the US is by far the largest export market for oil sands producers.
Restoring output
Canadian oil producers are reported to be in the process of restoring thousands of barrels per day of curtailed output, largely from the oil sands. As of last week, Cenovus Energy and Husky Energy had restored 70,000 bpd out of the combined 140,000 bpd that the two companies had shut in. At the same time, though, Cenovus’ CEO, Alex Pourbaix, voiced concerns about the Dakota Access ruling, pointing to the implications that other already operational pipelines could also be at risk.
“If that would be the new standard, I think it’s going to be incredibly di cult for anybody to invest in any kind of infrastructure,” Pour- baix said at a July 7 TD Securities conference. “If there’s an opportunity to come back on those regulatory decisions years a er the fact, I think that’s a real signi cant problem.”
Executives from Suncor Energy and Exx- onMobil unit Imperial Oil have echoed his concerns.
Nonetheless, the speakers expressed con- fidence that the worst of the recent oil price downturn is over.
“I believe we’ve made it by far through the worst of the situation and, as we see commodity prices grow, we’re seeing a strong price signal to bring production back,” said Pourbaix. He added that Cenovus was making deals with other producers to add to the amount it is per- mitted to bring to market under Alberta’s oil curtailment measures that have been in place
since 2019 to prop up Western Canadian oil prices. is will allow even more output to be restored.
South of the border, shale producers are also restoring output as West Texas Intermediate (WTI) prices remain stable at around $40 per barrel. And the industry will hope that a slow- down in the rate at which the US oil rig count is dropping is good news. In the week up to July 10, the oil rig count fell by 4. By contrast, over the month of April, 62 oil rigs on average were taken o ine each week as producers scrambled to respond to the collapse in crude prices and demand.
Much of the curtailed production that needs to be brought back online is located in the Per- mian Basin. However, the Dakota Access court ruling could deter Bakken producers from rush- ing to bring back output, and could potentially act as a deterrent to new pipeline plans in the region and beyond.
Pipeline development in Texas and along the Gulf Coast does not typically run into the same amount of opposition – o en leading to litiga- tion – as projects in other regions. Nonetheless, both the Keystone XL and Dakota Access rul- ings come as an unwelcome development for an embattled industry in which the upstream and midstream are highly interdependent.
Energy Transfer says it would lose up to $3.5mn per day while Dakota Access is idled, and roughly $1.4bn if the pipeline is shut for all of 2021. And draining the 1,172-mile (1,886- km) pipeline has been estimated to take about three months and cost around $27mn. Such costs associated with delayed and halted oil pipelines add to the growing list of deterrents that could hold back needed pipeline infrastruc- ture in the future.™
Canadian oil producers are reported to be in the process of restoring thousands of barrels per day of curtailed output.
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w w w . N E W S B A S E . c o m Week 28 16•July•2020