The situation at Canada’s Alberta Tar Sands Operations has gone from bad to worse as the super-low oil price is now costing the industry billions of dollars each month. Unbelievably, the price for the Western Canadian Select heavy oil fell to a gut-wrenching $14.65 yesterday down from a high of $58 in May. Tar sands oil is now selling at an amazing $40 discount to U.S. West Texas Oil which is trading at $56.
The main reasons for the falling price of Alberta tar sands are due to Canadian pipelines full to capacity as well as midwest U.S. refineries shut down for seasonal maintenance. Furthermore, the announcement by a U.S. Federal Judge to block the construction of the Keystone XL Pipeline on November 9th, didn’t help.
According to data from the Natural Resources Canada, the Alberta Tar Sands Operations were producing 2.7 million barrels per day (mbd) of oil in 2017. I would imagine production this year is likely to reach close to 3 mbd. The largest tar sands producer in Alberta is Suncor. Suncor produced a record 476,000 barrels per day of tar sands in the third quarter of 2018.
Now, Suncor reported a handsome $1.4 billion profit in Q3 2018 on $8.3 billion in revenues. However, that profit was based on much higher Western Canadian Select (WCS) oil price which was trading over an average of $35 for the quarter. Unfortunately, the average price of WCS so far in the fourth quarter is $20.75. And, if the price of WCS stays at the current low price, the tar sands operators will be receiving less than $20 a barrel.
In the article, Capacity shortages costing Canadian producers $100M/day, it stated:
“Heavy-oil producers are getting 40 percent of what they normally would be paid if we had access to markets,” said Grant Fagerheim, CEO of Calgary-based Whitecap Resources, which produces about 60,000 barrels per day.
…click on the above link to read the rest of the article…