Triple setback in oil sands

Gary Park

The curse of the oil sands — explosions, fires, breakdowns, unscheduled maintenance — has hit all three of the integrated operations in the last month.

Suncor Energy has taken the heaviest blow from explosions and a nine-hour fire on Jan. 4 that has slashed output to 110,000 barrels per day from 225,000 bpd and does not expect to know until later in January how much it will cost and how long it will take to repair the damage.

An eyewitness reported that a fireball rose six storeys into the air following the explosions.

Since then bitter temperatures in the minus -30s have turned water used to extinguish the blaze into massive amounts of ice that are being removed to determine the cause.

The fire started in a fractionator that separates crude oil into products such as kerosene or naphtha. As a result, Suncor has been forced to close one of its two upgrading refineries.

Costs will be cushioned by an insurance policy that limits Suncor to paying C$10 million in property damage.

Business interruption insurance takes effect after 30 days to compensate the company for lost production up to a maximum of US$1.15 billion.

The event revives bad memories for Shell Canada, which was hit almost a year ago with a fire just after starting production at its Athabasca project.

It took three months to repair that damage at a cost of C$150 million and prolonged the ramping up to full output of 155,000 bpd.

Now the Athabasca partners (Shell, Chevron Canada Resources and Western Oil Sands) are grappling with maintenance problems at their Scotford upgrader near Edmonton.

Repairs started in mid-October and have been extended twice and are now expected to take until the end of January to complete.

Meanwhile, Syncrude Canada’s synthetic crude output has been cut for three weeks since mid-December following a power outage at a processing unit.

The unit processes about 25,000 bpd of Syncrude’s total volume of 240,000 bpd.

But the setback was not expected to affect the consortium’s overall target for 2004 of 87 million barrels.