Canada oil sands thermal shutdowns pose risk to delicate reservoirs

Wed May 11, 2016 2:57pm EDT
 
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* Steam operations risk additional cost for shutdown and restart

* At least one company considers keeping production shut

* Conoco exec says 'big learning curve' for operation

By Nia Williams

CALGARY, Alberta, May 11 (Reuters) - The massive wildfire raging in Canada's oil sands region has forced some thermal projects to shut down steaming operations entirely, taking producers into uncharted territory, as delicate reservoirs that require continuous production could be at risk, analysts said.

Six companies have completely shuttered 115,000 barrels per day of thermal operations as a precaution against a wildfire that forced nearly 90,000 residents to evacuate the oil sands hub of Fort McMurray last week. That represents only about five percent of overall production from Alberta's oil sands, but for the companies involved, it is among the most expensive to restart.

At least one company is considering keeping a project shuttered indefinitely in the aftermath of the fire, reflecting how operators have had their hands forced by the blaze, as some were already considering curbing production because of low prices.

The technology needed to pump high-pressure steam to unlock bitumen deposits makes production costs expensive for thermal operators. But the costs of idling, and then cranking production back up, is also high, and the process involved in restarting production is delicate, especially for newer projects.

Producers that invested billions of dollars in oil sands reservoirs chose to operate at a loss rather than shut barrels in even at the peak of the crude price rout in the first quarter of 2016.   Continued...