Canada's Syncrude oil sands project losing $6 on every barrel

Wed Aug 19, 2015 4:09pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Nia Williams

CALGARY, Alberta Aug 19 (Reuters) - Canada's largest synthetic crude project, Syncrude Canada Ltd, is losing roughly $6 on every barrel it produces at current prices, a company presentation showed on Wednesday, a stark sign of the pain being felt by oil sands operators.

Even so, Canadian Oil Sands Ltd, the largest-interest owner in the Syncrude joint venture, said shutting in production is not something the company would consider given the high costs involved.

Syncrude is a 326,000 barrel per day mining and upgrading project in northern Alberta, at which mined oil sands bitumen is upgraded into refinery-ready synthetic crude.

In a presentation at the EnerCom Oil and Gas conference in Denver, Colorado, Siren Fisekci, COS vice president of investor and corporate relations, said Syncrude's break-even cost is C$57 ($43.46) a barrel.

That is around $6 higher than the current outright price for synthetic crude, which yesterday settled at $37.37 a barrel. Synthetic crude has been below $43 a barrel since early August as its discount to benchmark U.S. crude widened and global oil prices dived.

The cost to COS to produce Syncrude's fully upgraded oil is even steeper at C$62 ($47.27) a barrel once interest payments, administration, insurance and other costs are added in.

Break-even costs include operating expenses, regular maintenance, capital expenditures, crown royalties and development expenses and reclamation, according to the COS presentation.

Upgrading bitumen into synthetic crude adds extra expense, but the unusually detailed breakdown of costs underlines the difficulties facing all producers in northern Alberta.   Continued...