Oil sands plants hit by unplanned repairs

Gary Park

Petroleum News Calgary correspondent

Unscheduled maintenance has forced two of Canada’s three integrated oil sands operations to trim their production forecasts for 2004.

Suncor Energy said impurities in the raw bitumen it mined at its northern Alberta operation caused the temporary shutdown of an upgrader that produces refinery-ready synthetic oil, while Athabasca project operator Shell Canada had unexpected maintenance that resulted in lost production for the first half of July.

For Suncor the production target for the year has been trimmed to 220,000 barrels per day from its earlier estimate of 225,000-230,000 bpd, although that figure excludes its recently completed Firebag project, which is forecast to average 20,000 bpd and is planned to reach 35,000 bpd in 2005 as it taps a resource of 9.6 billion barrels.

Adding to the bad news, Suncor said the cash operating costs for its main facility will reach C$12-$12.50 per barrel for 2004, compared with an expected C$10.75-$11.75, reflecting costs of maintenance and natural gas, although the gas increase is likely to be offset by revenues generated from Suncor’s own gas output which was nearly 200 million cubic feet per day in the first quarter.

Peter Best, an analyst with Credit Suisse First Boston, promptly lowered his 2004 per share profit target to C$2.04 from C$2.20 on the basis of the news.

Shell Canada — whose partners, Chevron Canada and Western Oil Sands, each hold 20 percent stakes — lost an unspecified volume of production when a treatment plant that separates oil from sand and clay was closed while a tank was cleaned out.

Jan Rowley, public affairs manager at Shell Canada, said the maintenance involved only “fairly simple repairs,” allowing the consortium to resume its progressive growth from 136,000 bpd in the first quarter to its ultimate goal of 155,000 bpd.

With only 18 months’ experience, Athabasca faces the usual “bugs” for a newer operation, said Thomas Ebbern an analyst with Tristone Capital.

The long-term target for operating costs at the project is C$10-$12 per barrel, assuming natural gas prices do not rise above C$4 per thousand cubic feet, but Shell’s most recent guidance points to 2004 costs of C$12-$14 per barrel, reflecting the impact on costs and volumes of its continued ramp-up in production.