Production, patience driving Canada’s oil sands profits
Canadian oil sands operators enjoying firm profits on strong production are getting ready for a major boost when a new export pipeline to the Pacific coast goes into commercial service this week.
The federally owned 590,000 b/d Trans Mountain Expansion (TMX) remains on track to start operations on 1 May, and the line has already started to bear fruit. More than 4mn bl of Canadian crude is being pushed into the C$34bn ($25bn) expansion for linefill, helping to work down inventory levels in Alberta while lifting local prices relative to international benchmarks, as intended.
The largest four oil sands companies — Canadian Natural Resources (CNRL), Cenovus, Suncor, and Imperial Oil — are all shippers on the expansion. They closed 2023 with a new production record of 3.6mn b/d of oil equivalent (boe/d) combined in the fourth quarter, and are targeting further increases as they plan to fill the new pipeline. About 80pc of their output comes from their core oil sands businesses, with the balance from natural gas and offshore projects.
The higher output compensated for a slight dip in prices, helping to push profits higher. First-quarter 2024 results are likely to be a similar story, but it is the second quarter when producers look ready to shine as prices climb to multi-month highs. A combined profit of C$26bn in 2023 was a stellar result for the big four oil sands operators, despite a 25pc decline from the record C$34bn set the previous year. Their massive projects are agnostic to daily price swings, instead focused on uptime, long-term fundamentals and capitalising on key step-changes such as the one TMX presents. Patience in the oil sands is key.
TMX will cater largely to heavy crude producers, which saw diluted bitumen prices in Alberta rise only slightly quarter on quarter to $58/bl in the first quarter. But climbing global benchmarks in April and a shrinking heavy sour discount with the help of TMX linefill now has the outright price for the crude approaching $70/bl. This is above guidance given in 2024 corporate budgets, and far above oil sands operating costs that for some are as low as $12/bl.
The TMX factor
TMX will nearly triple the existing 300,000 b/d Trans Mountain system that connects oil-rich Alberta to the docks in Burnaby, British Columbia. The expansion was first conceived more than a decade ago with the intention of being operational by late-2017, but cost overruns and repeated delays put the project in jeopardy. Canadian producers that sought growth during that period of frustration are poised to take advantage of this new era of excess export capacity.
CNRL, Cenovus and Suncor have been significant buyers in the oil sands in recent years, doubling down on the world's third-largest deposit of oil while many international companies fled amid regulatory uncertainty. The government itself enabled a foreign operator to leave Canada, buying the Trans Mountain system from Kinder Morgan in 2018. But as Prime Minister Justin Trudeau's Liberal party sees TMX to completion, and then the line's planned sale, it is also readying legislation towards something more on-brand for climate-concerned Ottawa: carbon capture.
A carbon capture and storage (CCS) project spearheaded by Pathways Alliance — a consortium of the six largest oil sands producers — is awaiting federal and provincial help to push their proposal forward. Federal incentives are soon to become law, the Trudeau government said this month, with the expectation that tax credits will advance the massive C$16.5bn project and start to offset oil sands greenhouse gas emissions to meet net zero pledges for all parties involved. TMX represents a new era for Canadian crude producers, but so too does CCS, as it could attract even more investment into Alberta's oil sands region.
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India extends bid deadline for 28 oil, gas blocks again
India extends bid deadline for 28 oil, gas blocks again
Mumbai, 15 May (Argus) — India has further extended the deadline for submitting bids for 28 upstream oil and gas blocks in the ninth Open Acreage Licensing Programme (OALP) bidding round to 15 July. This is the second such extension in this bidding round under the Hydrocarbon Exploration and Licensing Policy's OALP. The ninth bidding round was announced on 3 January and bids were initially due by 29 February . The deadline was then extended to 15 May . The government did not provide a specific reason for extending the deadline. But a lack of investor interest could be behind the delay, said market participants, adding that declining crude production and a tax policy that is hard to navigate have kept interest in exploration limited to domestic participants. India's crude and condensate production was at 589,000 b/d in April 2023-March 2024, down by 24pc from 2013-14. Of the 28 blocks offered, nine are onshore blocks, eight shallow-water blocks and 11 ultra-deepwater blocks across eight sedimentary basins, with an area of 136,596.45 km². The Directorate General of Hydrocarbons (DHG) "carved out" five of these blocks, while the remaining 23 blocks are based on expressions of interest received from companies during April 2022-March 2023. The government had made offshore acreage of more than 1mn km² available for exploration and production operations off the west coast, east coast and the Andaman and Nicobar Islands, which were earlier called "no-go" areas. About 560,000km² will come under exploration by the end of 2024 after the ninth and tenth blocks are awarded. The tenth bidding round under the OALP will be launched as soon as the ninth round is completed and will have more "no go" areas available for exploration. India has held eight OALP rounds and awarded 144 exploration and production blocks comprising a total area of 242,055km². State-controlled upstream firm ONGC won seven blocks in the eighth licensing round, while a private-sector consortium of India's Reliance Industries and BP, state-controlled upstream firm Oil India and private-sector Sun Petrochemicals received one block each. The government introduced the OALP in 2017 to attract oil and gas firms to develop India's upstream sector. The OALP guarantees marketing and pricing freedom with a revenue-sharing model, apart from offering reduced royalty rates. By Roshni Devi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
IEA downgrades 2024 oil demand growth
IEA downgrades 2024 oil demand growth
London, 15 May (Argus) — The IEA now sees oil demand growth in 2025 outpacing this year, after it again downgraded its forecast for 2024 — mostly because of lower than anticipated first-quarter demand in Europe. In its latest Oil Market Report (OMR), published today, the Paris-based agency lowered its oil demand growth forecast for this year by 140,000 b/d to 1.06mn b/d, citing weak gasoil consumption. This would leave total oil demand in 2024 at 103.16mn b/d. "Poor industrial activity and another mild winter have sapped gasoil consumption this year, particularly in Europe where a declining share of diesel cars in the fleet were already undercutting consumption," the IEA said. The agency again lowered its 2024 forecast for Chinese oil demand growth, this time by 30,000 b/d to 510,000 b/d. It sees China's growth slowing to 360,000 b/d in 2025, but the country will remain the largest single contributor to global growth. The IEA also highlighted a rise in global oil inventories, which increased for a second consecutive month in March — by 36.4mn bl. It said preliminary data show further stock builds in April as "onshore oil inventories skyrocketed after oil on water was discharged." This after onshore stocks fell in March to the lowest since at least 2016, and OECD inventories to a 20-year low. The latest estimates mean the IEA now sees oil demand growth coming in higher in 2025 at 1.18mn b/d, up by 30,000 b/d from last month's estimate. This contrast sharply with Opec , which continues to see much higher growth this year at 2.25mn b/d and next year at 1.85mn b/d. On global oil supply, the IEA lowered its 2024 growth estimate by 160,000 b/d to 580,000 b/d citing maintenance in Canada, outages in Brazil and logistical constraints in the US. It noted a 150,000 b/d fall in Russian output in April, related to a new Opec+ production cut. It forecasts non-Opec+ growth to rise by 1.4mn b/d this year, and an 840,000 b/d fall from Opec+ because of production cuts. The agency projects global gains next year at 1.8mn b/d, with supply hitting a record 104.5mn b/d. The US, Guyana, Canada and Brazil continue to dominate global supply gains with a combined forecast 1.1mn b/d of additions this year and next. The IEA's latest forecasts imply a tighter market in 2024 than it previously anticipated. Its balances now show a global oil supply deficit of 460,000 b/d this year, compared with 270,000 b/d in last month's report. The projections assume Opec+ voluntary cuts remain in place until the of the year, although the group has yet to decide its output policy for the second half of the year. It may do so at a ministerial meeting scheduled for 1 June in Vienna. The IEA's latest balances put the call on Opec+ crude at around 42mn b/d in the second half of this year — 700,000 b/d above the group's April output. A recent slide in oil prices could keep pressure on the alliance to keep the cuts in place for longer. The IEA put the fall in oil prices down to concerns over the health of the global economy and dissipating fears of a wider conflict in the Middle East. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Alberta wildfire forces oil sands communities to flee
Alberta wildfire forces oil sands communities to flee
Calgary, 14 May (Argus) — A state of local emergency is unfolding near a major city in Alberta's oil sands region as an out-of-control wildfire grows in size, potentially putting various communities in its path. The wildfire to the southwest of Fort McMurray, Alberta, has grown to about 10,000 hectares (25,000 acres) after more than tripling in recent days, prompting officials to issue an evacuation order to residential communities on the southern part of the city on Tuesday. The Regional Municipality of Wood Buffalo has told residents in Beacon Hill, Abasand, Prairie Creek and Grayling Terrace to evacuate while the rest of Fort McMurray and neighbouring communities remain on an evacuation notice. "These neighbourhoods directly interface with where the fire could potentially spread. Regional Emergency Services will better be able to defend these neighbourhoods from wildfire if they are uninhabited and clear," said the municipality. Alberta's largest northeast city has a population of about 75,000 with many employed by oil sands operators in the region which pump out a combined 2mn b/d of crude. This comes in the form of both synthetic crude and diluted bitumen, representing roughly half of Alberta's output. No evacuation orders have been made for oil sands projects, so far, with most being about 40 kilometres (25 miles) or more north of Fort McMurray. Some oil sands projects have already been winding down for seasonal maintenance. There are about 50 active fires in the province. One other, near Grande Prairie in the northwest, is also out of control. About 400,000 b/d of oil equivalent (boe/d) were shut in a year ago in what was the worst wildfire season on record, according to the province. The blazes mostly affected operations in the liquids- rich northwest part of the province, but at least one oil sands project also had to temporarily evacuate. Wildfires also affected Alberta production in 2019, but the most devastating for the region was three years earlier, when fires forced mass evacuations and destroyed parts of Fort McMurray. Wildfires in the spring of 2016 knocked about 1mn b/d of crude output off line. "It's important to note that fire activity is very different than the 2016 Horse River wildfire and we are well positioned to respond to this situation," said regional fire chief Jody Butz on Tuesday. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
CVR expects normal Oklahoma refinery ops by end 2Q
CVR expects normal Oklahoma refinery ops by end 2Q
Houston, 14 May (Argus) — US independent refiner CVR has restarted several key units at its 75,000 b/d Wynnewood, Oklahoma, refinery and expects a return to normal operations by the end of the second quarter after a 28 April fire . The refiner has restarted a crude distillation unit (CDU), fluid catalytic cracking unit (FCC) and alkylation unit at the plant, while a reformer is restarting, CVR said in an operational update today. The April fire damaged pipe racks and pumps associated with the plant's naphtha processing units, the company said. CVR expects throughputs of 170,000-190,000 b/d in the second quarter, information it did not report during earnings released on 29 April as it assessed the impact of the fire. CVR reported throughputs of 201,000 b/d in the second quarter of 2023. The refiner expects its renewable diesel unit co-located at the Wynnewood plant to run throughputs of 1,800-2,600 b/d in the second quarter, down from 4,700 b/d in the prior year period. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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