A shutdown at the Syncrude oil sands facility in northern Alberta has curbed output from ConocoPhillips' Surmont plant, the U.S.-based company said on April 4, as the shortage helped push heavy Canadian crude prices to the narrowest discount in nearly two years.
The 350,000 barrels per day (Mbbl/d) Syncrude project cut production for all of April to zero, according to market sources, following a fire in March that damaged the facility and forced the operator to bring forward planned maintenance.
ConocoPhillips (NYSE: COP) has had to reduce production at its 140 Mbbl/d Surmont thermal plant because it uses light synthetic crude from Syncrude, one of the largest producers in Canada's oil sands, to dilute tarry bitumen into a heavy blend that can flow through pipelines.
"[The] Syncrude outage has had an impact on our output, but we are working with suppliers to understand the time line as the Syncrude owners work towards a full recovery,"ConocoPhillips Canada spokeswoman Michelle McCullagh said in an email.
She did not specify the reduction in crude volume, but combined with the Syncrude outage, up to 490 Mbbl/d, or nearly one-fifth, of the oil sands' 2.5 MMbbl/d of supply is potentially off the market.
On top of that, Suncor Energy's 180 Mbbl/d Firebag thermal plant is also undergoing planned maintenance this quarter, adding to the shortage of heavy crude.
Canada produces about 4 MMbbl/d and exports about 3.1 MMbbl/d, almost entirely to the U.S.
Prices for heavy and synthetic Canadian crude have surged on tight supply and extended gains on April 4.
Western Canada Select heavy blend crude for May delivery last traded at $10.15/bbl below the West Texas Intermediate benchmark--the smallest discount since June 2015--according to Shorcan Energy Brokers.
Light synthetic crude from the oil sands for May delivery last traded at $5.30/bbl over WTI, having settled at $4.85/bbl over the benchmark on April 3 .
Syncrude is a joint venture majority-owned by Suncor Energy Inc., while Imperial Oil Ltd. provides operational, technical and business management support.
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