Syncrude Canada Site Output Down as Fire Continues Burning

Reuters, March 16, 2017

Several crude bitumen processing upgrader units at Syncrude Canada's oil sands plant in Alberta were shut or running at minimized rates on Wednesday as a fire continued to burn for a second day, the company said.

Mining and extraction of bitumen at Syncrude's Mildred Lake and Aurora sites are also being paced to balance the resulting lower demand, the company said in a statement. Syncrude spokesman Will Gibson said the fire at the site in northern Alberta had been "isolated and controlled." Syncrude, Canada's largest single source of synthetic crude, is majority-owned by Suncor Energy Inc, while Imperial Oil Ltd provides operational, technical and business management support. Suncor said parts of the 350,000 barrel-per-day Mildred Lake upgrading facility, which makes the tar-like bitumen less viscous, were running at minimum rates, but neither it nor Syncrude specified the capacity. Synthetic crude prices had jumped on uncertainty over the production impact. Two trading sources said they had been issued notice by one of Syncrude's owners that there could be volume cuts as a result of the fire but the impact and duration were being determined.

Syncrude said it planned a damage assessment and would begin repairs once it was safe. It has not given any estimate of the expected impact on crude output. Gibson said Syncrude fire crews monitoring the blaze had decided to allow it to continue to burn to consume residual hydrocarbons. "This is the safest approach ... we have reduced the fire load considerably," Gibson said. Syncrude said on Twitter late on Wednesday, "All Syncrude employees are asked to report to work as normal beginning with nightshift this evening." The fire broke out on Tuesday afternoon after a line failure caused a treated naphtha leak, Syncrude said, adding that the remainder of the operation was safe and stable. The local detachment of the Royal Canadian Mounted Police said the incident was not a "criminal event," but that it was assisting the province's labor department in investigations. Synthetic crude prices soared to a nine-month high of $2 a barrel over the West Texas Intermediate benchmark, according to Shorcan Energy brokers, after the premium had jumped to 80 cents at settlement on Tuesday.

Syncrude already had a turnaround scheduled to run from late April until June and some traders in Canada's oil capital Calgary questioned whether that could be moved forward. "Judging by the strength of synthetic crude prices the market is of the mind production will be curtailed for some time, whether that be non-voluntary or intentional," said RBC Capital Markets analyst Mike Tran. "Syncrude could potentially fast-forward the timing of upcoming planned maintenance." An explosion rocked the Mildred Lake facility Tuesday afternoon, prompting an evacuation, employees said. The facility is about 40 km (25 miles) north of the oil sands hub of Fort McMurray. One worker injured in the fire was in hospital in serious but stable condition, according to Alberta Health Services. "Yesterday was a tough day for our organization and especially difficult for one employee and his family," Syncrude Chief Executive Mark Ward said in a statement.

(Reporting by Ethan Lou and Nia Williams; Additional reporting by Catherine Ngai in New York; Editing by James Dalgleish, Toni Reinhold)

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