Oilsands companies restoring production as demand growth spurs higher prices

Oilsands companies restoring production as demand growth spurs higher prices

CALGARY — Oilsands companies are restoring thousands of barrels of daily production to take advantage of higher oil prices as relaxed pandemic measures allow North American consumers to get back on the road.

Executives speaking at a TD Securities energy conference on Tuesday said they are confident the oil price crisis is subsiding — while expressing dismay at recent setbacks for oil pipelines in the United States.

“I believe we’ve made it by far through the worst of the situation and, as we see commodity prices grow, we’re seeing a strong price signal to bring production back,” said Alex Pourbaix, CEO of Cenovus Energy Inc.

The Calgary-based company stopped about 60,000 barrels per day of crude production and halted crude-by-rail shipments as prices fell in March and April, but has since restored about half that, Pourbaix reported.

Cenovus is also making deals with other producers to add to the amount it is permitted to bring to market under Alberta’s oil curtailment measures, he added, thus allowing even more output to be restored.

In a separate session, Suncor Energy Inc. CEO Mark Little said he expects a ”downstream-led recovery” as consumer demand sparks increased throughput from its Canadian refineries. That consumer-led demand will then translate into more production from its oilsands and other “upstream” assets.

He didn’t say when he expects to reverse Suncor’s oil production cuts, which included going to one production train from two at its 194,000-barrel-per-day capacity Fort Hills oilsands mine.

Husky Energy Inc. has restored about 40,000 bpd of the 80,000 bpd in oil production it took offline as demand for products produced at its U.S. refineries rises, said chief financial officer Jeff Hart at the conference.

“We continue now to bring up both our upstream and downstream production in concert with one another and in concert with where we see the end demand,” he said, noting full restoration is expected in July or August.

The recovery in consumer demand is boosting confidence at Imperial Oil Ltd. as well, CEO Brad Corson told the conference, without giving production specifics.

He said his company, which is 69.6 per cent owned by Exxon Mobil Corp., is seeing strong markets for its gasoline and diesel products, but jet fuel demand remains about 70 per cent lower than it was at this time last year.

Imperial and Suncor both own refineries in Eastern Canada that have been affected by disruptions on Enbridge Inc.’s Line 5 pipeline through the Great Lakes.

Enbridge shut down both legs of the pipeline last month after noticing a disturbance to an anchor support on its underwater east leg in the Straits of Mackinac.

The west leg was restarted, then ordered shut down by a judge at the request of state Attorney General Dana Nessel (who has also asked for a preliminary injunction that could keep Line 5 closed indefinitely).

Last week, the judge allowed the west leg to reopen but the other leg remains closed until more testing is completed.

Suncor’s Little said ongoing efforts by Michigan state politicians to retire Line 5 over fears of environmental damage if it leaks pose a “huge potential threat” for consumers in Michigan as well as Ontario and Quebec.

He said Suncor has the option to use rail and ships to transport oil to its refineries at Sarnia, Ont., and Montreal, but that drives up costs and will have an affect on consumers.

Corson said Line 5 is “integral” to getting crude to its Ontario refineries at Sarnia and Nanticoke but the company has developed a contingency plan using rail and ships in case there is a prolonged disruption.

On Monday, the U.S. District Court for the District of Columbia said the three-year-old Dakota Access pipeline that takes oil from North Dakota to an Illinois hub must shut down by Aug. 5 because a crucial federal permit fell short of National Environmental Policy Act requirements.

If the pipeline is closed, it would affect Calgary-based Enerplus Corp., which produced 50,872 barrels of oil equivalent per day in North Dakota in the fourth quarter of last year.

In a session at the conference, CEO Ian Dundas said there is plenty of crude-by-rail transport from the state but a pipeline shutdown would hurt profitability because rail transport costs $6 to $8 more per barrel than pipeline.

Enerplus’s shares fell by as much as 7.5 per cent in Toronto on Tuesday to $3.19.

Cenovus’s Pourbaix said the Dakota Access ruling will make it difficult to build any major American infrastructure — including highways and high-voltage power lines — going forward.

“If there’s an opportunity to come back on those regulatory decisions years after the fact, I think that’s a real significant problem,” he said.

This report by The Canadian Press was first published July 7, 2020.

Companies in this story: (TSX:SU, TSX:ENB, TSX:IMO, TSX:HSE, TSX:CVE, TSX:ERF)

Dan Healing, The Canadian Press

Oilsands

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Alberta has 3,651 active cases of COVID-19. (File photo)
432 new COVID cases sets another record Friday

Central zone holds steady at 126 active cases

The future site of the Rimbey Travel Centre. Web photo
New Rimbey development aims to capitalize on highway traffic

Phase I of the Rimbey Travel Centre would be along Hwy. 20, if approved

"We are looking seriously at the spread and determining what our next steps should be," says Alberta’s chief medical officer of health, Dr. Deena Hinshaw, as the daily number of COVID-19 cases continues to climb.
427 new COVID cases is highest in Alberta ever

Central zone has 126 active cases of COVID-19

soup
Rimbey FCSS to introduce the Cultural Community Kitchen

The Cultural Community Kitchen sessions will be held at the Rimbey Co-op

robbery
UPDATE: Shooting suspect arrested by Wetaskiwin/Camrose RCMP

Rimbey RCMP had responded to a complaint of an armed robbery at the Bluffton City General Store

B.C. Liberal leader Andrew Wilkinson, B.C. NDP leader John Horgan and B.C. Greens leader Sonia Furstenau. (Black Press Media)
VIDEO: One day until B.C. voters go to the polls in snap election defined by pandemic

NDP Leader John Horgan’s decision to call an election comes more than a year ahead of schedule and during a pandemic

Ryen Williams, 11, with a lost miniature horse at JJ Collett Oct. 23. Photo by Don Williams
UPDATE: Owners found

Father and son found him while out for a walk at JJ Collett

A Le Chateau retail store is shown in Montreal on Wednesday July 13, 2016. Le Chateau Inc. says it is seeking court protection from creditors under the Companies’ Creditors Arrangement Act to allow it to liquidate its assets and wind down its operations.THE CANADIAN PRESS/Ryan Remiorz
Clothing retailer Le Chateau plans to close its doors, files for CCAA protection

Le Chateau said it intends to remain fully operational as it liquidates its 123 stores

U.S. border officers at the Peace Arch crossing arrested two men on California warrants this week. (File photo)
Ottawa predicts system delays, backlogs unless court extends life of refugee pact

Canada and the United States recognize each other as safe places to seek protection

Conservative member of Parliament Michelle Rempel Garner, left to right, Conservative Leader Erin O’Toole and Conservative Deputy Leader Candice Bergen arrive to hold a press conference in Ottawa on Thursday, Oct. 22, 2020. THE CANADIAN PRESS/Sean Kilpatrick
No-confidence showdown over sweeping Tory motion on government handling of pandemic

The Conservative motion is to be put to a vote Monday and has the support of both the Bloc Québécois and NDP

From l-r., first lady Melania Trump, President Donald Trump, moderator Kristen Welker of NBC News, Democratic presidential candidate former Vice President Joe Biden and his wife Jill Biden on stage at the conclusion of the second and final presidential debate Thursday, Oct. 22, 2020, at Belmont University in Nashville, Tenn. (AP Photo/Patrick Semansky)
Trump, Biden fight over the raging virus, climate and race

Republican president declared the virus, which killed more than 1,000 Americans on Thursday alone, will “go away.”

JJ Collett Natural Area Foundation held its AGM on Oct. 19 at the Ponoka Legion. (Emily Jaycox/Ponoka News)
De-listing Alberta parks creates ‘risk’ for coal mining: CPAWS

Canadian Parks and Wilderness Society speaks at JJ Collett AGM

COVID-19. (Image courtesy CDC)
Temporary COVID-19 testing sites coming to Wetaskiwin and Ponoka

The Wetaskiwin location will open Oct. 23, 2020 and the Ponoka location will open Oct. 29.

ACC President and CEO Ken Kobly spoke to Ponoka Chamber of Commerce members over Zoom on Oct. 20. (Image: screenshot)
Alberta chambers are ‘411’ to members, government: ACC president

Changes to government supports, second wave and snap election

Most Read