May 3, 2018
Canadian Natural Resources Ltd. says it choked back heavy oil production by about 17,000 barrels per day in the first quarter to avoid selling at low prices it blames on poor pipeline capacity out of Western Canada.
The company told Canadian Press it is now gradually ramping up output from its heavy oil wells in northern Alberta as the discount being paid for Western Canadian Select grade oil has narrowed in comparison to New York-traded West Texas Intermediate.
Fellow Calgary-based oilsands producer Cenovus Energy Inc. last week reported that it had also reduced heavy oil output in the first quarter for the same reason but was bringing production back on stream.
The differential closed at US$17.55 per barrel on Wednesday after trading at around US$30 earlier this year.
“With the current pipeline restrictions for both crude oil and natural gas, the company will be proactive in our actions to manage our assets and preserve long-term value,” said president Tim McKay on a conference call to discuss first quarter results. “As a reminder, heavy oil only makes up 25 per cent of our volumes but for every US$1 change in the differential it is approximately $90 million in after-tax cash flow to our company.”
Uncertainty continues to plague proposed new pipelines.
The Keystone XL project from Alberta to Texas has been delayed, the future of an expanded Trans Mountain line to Vancouver is in doubt and a routing dispute has emerged over Enbridge Inc.’s Line 3 export pipeline replacement project.
Bob Espey – chief executive of Alberta-based Parkland Fuel Corp. – told Canadian Press he has been in contact with both provincial governments about the Trans Mountain pipeline expansion project and remains hopeful that the issues can be resolved in a way that is beneficial to Canada, and both provinces.
Espey adds during a call to discuss its latest quarterly results that he is confident Parkland, which owns a refinery in Burnaby, B.C., can continue to serve its customers.