Friday, August 3, 2018

Transportation Bottlenecks Force Canada's Largest Crude Oil Producer To Curtail Heavy Oil Production -- August 3, 2018

Earlier today I posted the following:

Keystone XL: three links today --
South Dakota, over at kallanashenergy.
  • TransCanada digging up section of "old" Keystone to check pipeline's coating
  • ordered by US regulators
  • pipeline section being investigated near previous spill; near Amherst, South Dakota
Pipeline progress, over at NPR --
  • company provided update at quarterly earnings call
  • some suggest it appears the Keystone XL is no longer needed
And, then, finally, at Reuters via Rigzone:
  • upbeat story
After reading all three stories, I really didn't know whether the NPR was closer to the "truth" or not regarding the "need" for the Keystone XL. Considering the source (NPR) I did not put a lot of stock into their story, but it raised some questions.

Now this story over at oilprice: Canada's largest oil produced is curtailing activities in western Canada because of transportation bottlenecks. That pretty much confirms that NPR is full of crap.

Data points at the linked oilprice article:
  • because of transportation bottlenecks (i.e., not enough pipeline capacity) for its heavy oil -- which the Keystone XL would exclusively carry out of Canada -- Canada Natural Resources is curtailing heavy oil production; turning to lighter oil drilling
  • US Gulf Coast refineries were optimized for heavy oil -- the kind that would have been delivered from western Canada via the Keystone XL
  • the benchmark price of oil from Canada's oil sands -- Western Canadian Select (WCS) -- fell again
  • the WTI (Cushing) - WCS (Hardisty, Alberta) discount rose to $30.80 / bbl -- the largest differental since December, 2013
  • Canada Natural Resources production has dropped about 3% yoy
Two notes from the linked article:
“Due to current market conditions the Company has exercised its capital flexibility by shifting capital from primary heavy crude oil to light crude oil in 2018, resulting in an additional 7 net light crude oil wells targeted to be drilled in the second half of the year. Primary heavy crude oil drilling was reduced by 24 net primary heavy crude oil wells in Q2/18, with an additional 35 primary heavy crude oil well reduction targeted for the second half of the year,” Canada Natural Resources said yesterday.
Canada is producing record amounts of heavy oil from the oil sands and its economic recovery is driven by the oil industry, but drillers are finding it increasingly difficult to get this oil to market because pipelines are running at capacity and new ones are finding opposition from various groups.
So many story lines in this article.

One story line: this reinforces how important the Trans Mountain Pipeline expansion project is.

Ticker symbol for Canadian Natural Resources (CNQ).

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