By Nia Williams
CALGARY, Alberta, Jan 22 (Reuters) - Canada's biggest oil
sands producers, which have stubbornly resisted halting output
even as the price of their crude hits record lows, are planning
a higher-than-normal maintenance schedule this year
The move is seen temporarily curbing supply in the second
and third quarters, which should lift crude prices in the region
and give producers a respite from selling their barrels below
cash costs.
Among producers planning major work at their facilities,
Suncor is planning the first five-yearly turnaround on its U2
upgrader, Cenovus has three turnarounds planned versus none last
year and Canadian Natural has scheduled 30-35 days of
maintenance deferred from 2015.
Not all producers disclose the impact on output, making
year-on-year comparisons difficult, but Suncor, Cenovus and
Canadian Natural's turnarounds alone will shut off about 22,000
barrels per day of heavy and synthetic crude on an annual basis
below what they would otherwise produce.
One industry source, who declined to be named because he was
not authorized to speak to the media, said there will be another
round of maintenance at the Syncrude oil sands project later
this year. Syncrude's biggest stakeholder Canadian Oil Sands Ltd
COS.TO did not immediately respond to a request for comment.
Sheldon Mckenna, international representative for the
International Operating Engineers Union, said 2016 would be an
unusually busy maintenance year because some producers had
deferred costly turnarounds in 2015 when the oil price slide
first prompted them to cut back on spending.
A new left-leaning provincial government in Alberta that
raised corporate taxes and pledged to review royalty rates also
unsettled producers and caused them to delay work, the trade
union representative said.
Essential maintenance work cannot be put off indefinitely
but companies can time it to tie in with oil sands expansions,
as Canadian Natural plans to do at its Horizon project.
Analysts said companies may be inclined to string out the
work.
"When we have turnarounds at upgraders I would be skeptical
they would be coming back as quickly as if prices were $60 a
barrel," said Barclays (L:BARC) analyst Michael Cohen.
Earlier this week heavy Canadian crude hit a record low
under $14 a barrel while synthetic crude, processed at
upgraders, traded under $30 a barrel. CRU/CA
Junior oil sands producer Connacher Oil and Gas CLC.TO is
accelerating planned maintenance at its Great Divide project
over the next couple of months and cutting production by around
10,000 bpd.
None of the major oil sands producers said they were
considering extending maintenance, but Terry Abel, director of
oil sands at the Canadian Association of Petroleum Producers,
said all companies were likely looking at opportunities to
reduce costs by tweaking turnaround schedules.
"They may be bringing forward some turnarounds because it's
opportune as well," he said.
Those companies that delayed pricey turnarounds from last
year will benefit from labour and supply costs that have come
down around 30 percent since last year.
($1 = 1.4137 Canadian dollars)
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For a FACTBOX on maintenance, see: L2N14Z2Q2
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(Editing by Andrew Hay)