Canada’s Suncor Energy has pipeline and refinery capacity that largely shields it from the record low Canadian heavy oil prices, so it doesn’t need to scale back production as some of its competitors do in response to the steep discounts of Canadian oil, Suncor’s CEO Steve Williams said on Thursday.
“The higher-cost producers are having to pull back because they’re not making any margin on their last barrel. We’re not in that circumstance,” Reuters quoted Williams as saying on a call with analysts. “If we were, we wouldn’t hesitate to pull throughput back,” Williams noted.
Due to the pipeline capacity constraints, the discount at which Western Canadian Select (WCS)—the benchmark price of oil from Canada’s oil sands delivered at Hardisty, Alberta—trades relative to WTI has severely widened, and WCS has been selling for as low as US$20 in recent weeks.
On Wednesday, Suncor reported a new quarterly production record of 476,100 bpd of oil sands production for Q3, driven primarily by strong operational reliability and record in situ production.
Also on Wednesday, another Canadian company, Cenovus Energy, said in its Q3 earnings release that “Cenovus also has the ability to respond to widening differentials and the current environment for Canadian producers by strategically slowing production at Foster Creek and Christina Lake. The company is currently operating both facilities at reduced volumes and is managing production levels to avoid any impacts to its reservoirs.”
On the earnings call, Cenovus Energy’s President and CEO Alex Pourbaix urged the Canadian industry to slow down production to ease bottlenecks.
“And I want to be clear on this, the industry right now has a production problem. We’re going to do our part but we are not going to carry the industry on our back. I think this is something that has to be dealt with on an industry wide basis,” Pourbaix said.
“In the meantime, we’re taking additional steps to mitigate our exposure to widening differentials by temporarily ramping down a portion of our production until prices improve,” he added.
Pourbaix expects the pressure on the price differentials to ease with U.S. refineries coming back online later this quarter, the ongoing ramp up of crude-by-rail out of Alberta, and the startup of Enbridge’s Line 3 Replacement project next year.
By Tsvetana Paraskova for OIlprice.com
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