Fort Hills Could Be Alberta’s First Victim In World Price War

0
130


The last major oil sands mine to start operating in northern Alberta may be Canada’s first major casualty in the price war between Saudi Arabia and Russia and the Covid-19 pandemic.

One of the partners in the Fort Hills project, which officially opened in September 2018, Teck Resources Ltd. plans to close the mine completely to cut costs after local prices hit record lows. Another partner of the company, Suncor Energy Inc., announced last week that one of the mine’s two production lines would be shut down to save money.

“The partners continue to further analyze the opportunities for reducing capital and operating costs, and, as you can imagine, we are certainly considering the potential termination of the operation,” said Don Lindsay, CEO of Teck during a presentation to investors. “However, more work needs to be done and we will keep you posted as the work progresses. “

Storage tanks around the world are full of crude oil as the global pandemic destroys demand, while Saudi Arabia and Russia flood the market in a fight for market share. The double shock pushes certain producers to the brink, the shaiting titan Whiting Petroleum Corp. having filed for bankruptcy on Wednesday. Meanwhile, refineries in North America are cutting fuel production, with some shutting down completely.

Fort Hills can produce 194,000 barrels of oil a day, more than OPEC member Equatorial Guinea. Total SA is also one of the owners.

“At this time, we have made no decision to make a full stop,” said a Suncor representative. “The partners have not discussed a complete shutdown,” which would require unanimous shareholder consent, she said.

Canadian oil producers have already announced about 100,000 barrels per day of production cuts in response to falling prices, said Emily Chieng, analyst at Goldman Sachs Group Inc., in a note. Further reductions will be needed to meet the reduction in demand, otherwise commercial inventory levels could be exceeded within two to three weeks, she said.

Oil sands closings could reach half a million barrels a day, with most operational closings starting in May, said Matt Murphy, director of research at Tudor Pickering Holt & Co., by phone

LEAVE A REPLY

Please enter your comment!
Please enter your name here