Alberta regulator calls for partial shutdown at CNOOC project
The Alberta Energy Regulator (AER) recently announced that it would partially lift a suspension order it issued August 28 against China National Offshore Oil Corp (CNOOC, ticker: CEO) subsidiary Nexen Energy ULC. With the change in the AER’s suspension decision, Nexen will be able to maintain approximately 75% of its Long Lake oil sands production and upgrader operations, according to a company press release.
The AER initially suspended the operating licenses affecting 95 pipelines at Nexon’s Long Lake heavy oil extraction facility for suspected failure to comply with mandatory rules. The suspension order came amid an investigation into an accident reported in July involving a ruptured pipeline at the facility that forced the CNOOC subsidiary to halt 9,000 barrels per day of production and brought into question the safety of the company’s operations.
Of the 95 pipelines initially targeted, some 55 remain suspended and 45 others can now be operated, according to The Wall Street Journal. The AER’s decision to partially lift the suspension came after a determination that some “utility” pipelines met all safety requirements, the regulator said.
“The AER is satisfied that the company has met the requirements detailed in the suspension order by demonstrating that these utility lines can be operated safely,” said AER spokeswoman Carrie Rosa.
CNOOC purchased Nexen for $15 billion in 2013 and installed its own management team last year. The Long Lake project is located near the town of Anzac, which is about 261 miles northeast of Edmonton. The project has a total production capacity of 72,000 barrels of oil per day, though it has never reached full-capacity.
Oil sands projects continue to move forward
Despite the drop in oil prices, many oil sands projects continue to come on-steam. ConocoPhillips (ticker: COP) announced last September 1, that it had produced first oil from its Surmont 2 oil sands facility, also located in Alberta. The substantial amount of capital invested in the projects up front, combined with their long life-cycles, continue to make them attractive for oil majors.
ConocoPhillips believes that its Surmont project will yield 30 years of flat production, working out to approximately $20 per BOE full-cycle F&D costs. The company has already realized $12 per BOE in cost reductions, and would like to realize an additional $13 per BOE.