February 9, 2010 / 9:42 PM / 8 years ago

UPDATE 3-Suncor reports another oil sands upgrader fire

* Midnight fire at upgrader unit

* Unit capable of producing 125,000 bpd

* Canadian syncrude differentials up after fire - trade

(Adds market reaction and other details.)

CALGARY, Alberta, Feb 9 (Reuters) - Suncor Energy Inc (SU.TO) said one of two oil sands upgraders at its massive project site near Fort McMurray, Alberta, caught fire just a week after it completed repairs to another unit after a December blaze.

The company said in a release that the fire broke out around midnight at its U1 upgrader, capable of producing up to 125,000 barrels of synthetic crude a day. The unit was closed after the fire. There were no injuries reported.

Suncor said it is assessing the damage to the unit, which converts tarry bitumen from the oil sands into refinery-ready crude. The company said the unit had been shut but spokesman Brad Bellows could not specify how much synthetic crude the unit was producing before the fire.

Differentials for syncrude firmed after the fire. Traders said syncrude rose 15 cents a barrel to trade for 75 cents above West Texas Intermediate late Tuesday. Some of the Canadian crude typically flows into the U.S. Midwest region, where it can be refined by companies including BP (BP.L) and Marathon (MRO.N).

The company’s 135,000 bpd refinery in Edmonton, Alberta, also runs oil sands-based feedstock to make gasoline and diesel.

U.S. crude traders say that the outage shouldn’t have a major impact on oil futures prices, since U.S. crude stocks are well above five-year historical average levels for this season and refiners aren’t competing much for barrels.

While output of synthetic crude will be reduced as repairs are made, the company said it may decide to sell on the open market the up to 160,000 barrels of bitumen per day that the upgrader would have processed into 125,000 bpd of synthetic crude.

That could involve blending bitumen with light liquids before dispatching it.

“We have some options to sell diluted bitumen down the (pipeline),” Brad Bellows, a spokesman for company said. “We’ll see as we go through the next several days to what degree volumes are impacted ... We could make our lost volumes up with some more heavy (oil) sales into the market.”

The fire had little early impact on New York Mercantile Exchange crude prices, with the March contract up $2.21 at $74.10 per barrel in post-settlement trade.

Fires are not uncommon at the massive upgraders.

The incident is the third fire at one of the company’s upgraders in five months. In December, a blaze broke out in the coker unit at its larger upgrader 2 unit, capable of producing as much as 175,000 bpd, and repairs were only completed on Feb. 2.

A serious blaze broke out at the Suncor project in January 2005 and water used to fight the fire froze and encased an upgrader in ice. Production was cut in half for the eight months it took to complete repairs.

Suncor shares rose 57 Canadian cents, or 1.8 percent, to C$31.85 on the Toronto Stock Exchange.

$1=$1.07 Canadian Reporting by Scott Haggett; Additional reporting by Gene Ramos, Bruce Nichols and Joshua Schneyer; editing by Rob Wilson and Marguerita Choy

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