March 26, 2015 / 6:29 PM / in 2 years

Canadian upgrader maintenance to cut second quarter synthetic crude supply

CALGARY, Alberta (Reuters) - More than 10 percent of Canada’s synthetic crude supply is set to go offline during the second quarter of 2015 as oil sands producers in northern Alberta carry out planned maintenance at four major facilities that upgrade tar-like bitumen into crude.

Royal Dutch Shell (RDSa.L), Suncor Energy Inc (SU.TO) and Canadian Oil Sands Ltd COS.TO, which is the largest interest owner in the Syncrude Canada project, all confirmed this week they have scheduled maintenance for this spring.

Maintenance on the upgraders, which convert mined bitumen from the oil sands into refinery-ready synthetic crude, is likely to support prices over the next couple of months.

Light synthetic oil-sands crude for April delivery has been trading at a premium to West Texas Intermediate crude throughout March in anticipation of curtailed supply.

Synthetic crude was last bid at $1.50 per barrel above WTI, according to Shorcan Energy brokers.

Canadian Oil Sands said Syncrude’s Coker 8-3 would undergo a turnaround in the second quarter. It is one of three 100,000 barrel per day cokers at the project, meaning Syncrude output will be cut by about a third.

COS spokesman Scott Arnold said the company did not typically comment on planned turnarounds, but on average they take 40 to 50 days and reduce production by four to five million barrels.

“The total supply of synthetic (from the oil sands) is 800,000 or 900,000 bpd, so it is taking 10 plus percent off the market,” said FirstEnergy Capital analyst Mike Dunn.

Royal Dutch Shell will carry out maintenance at its 255,000 bpd Scotford, Alberta, upgrader in the spring, a major turnaround that takes place every four to five years.

“It’s not small-scale maintenance,” said Shell spokesman Cameron Yost. He declined to say how much production would be affected.

Suncor has maintenance scheduled for the second quarter at its U1 and U2 upgraders in northern Alberta, which have a combined capacity of 350,000 bpd.

The U1 upgrader has five weeks of maintenance scheduled, affecting production by around 40,000 bpd, while the U2 upgrader turnaround is expected to last two weeks and cut output by 30,000 bpd.

None of the producers gave start or end dates, but FirstEnergy’s Dunn said they would likely avoid competing for labor.

“There’s a pool of labor that works on these turnarounds at various oil sands assets. I’d think they would not all do turnarounds at the same time,” Dunn said.

Editing by Peter Galloway

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