UPDATE 1-Spills force Canadian Natural to cut 2014 Primrose output

Wed Jul 31, 2013 1:15pm EDT

By Nia Williams

CALGARY, Alberta, July 31 (Reuters) - Canadian Natural Resources Ltd has cut its forecast for 2014 production at its Primrose oil sands project in northern Alberta due to leaks of tarry bitumen emulsion that could take months to stop completely, company President Steve Laut said on Wednesday.

Canadian Natural said it has so far cleaned up 6,300 barrels of the emulsion, bitumen mixed with water, from four different sites at the Primrose project.

The leaks, which were first spotted on May 20, prompted the Alberta Energy Regulator to restrict the amount of steam the company can pump into the oil sands reservoir to extract bitumen.

Laut said Canadian Natural has cut its forecast for 2014 production at Primrose to roughly the same level as 2013 - 100,000-110,000 barrels per day (bpd) - as a result of the seepage.

"That's about 10,000 bpd less than initially targeted so there has been an impact," Laut said, adding 2013 production guidance so far remains unchanged.

The project uses a high-pressure cyclic steam stimulation method to extract bitumen from the oil sands. Steam is pumped into a well for an extended period to liquefy the reserve. The bitumen is then pumped out using the same well.

Canadian Natural said the leaks have been stopped and the spill contained, but that bitumen emulsion would continue to seep out of the ground for some time. It said it believed the leaks were the result of mechanical failures in the welllbores, or drill holes.

"There's a volume (of bitumen emulsion) that got there through a level of wellbore failure that has to bleed out," Laut said. "Over time, that becomes less and less and will eventually drop off to nothing. It could take weeks, it could take months."

The company said fewer than 20 barrels a day are still seeping to the surface. It said the spills initially covered an area of 20.7 hectares, and have now been contained in 13.5 hectares.

Sixteen birds, seven small mammals and 38 amphibians have died, although the bitumen emulsion presents no danger to humans, Canadian Natural said.

Laut said at this point the cost of the clean-up operation is estimated to be about C$40 million ($39 million).

Cara Tobin, spokeswoman for the Alberta Energy Regulator, said it was too soon to tell whether fines would be imposed on the company, but an investigation was underway.

"The incident is still ongoing, it's too early to make the call on enforcement," Tobin said. "We will be doing a lot of research over the next little while to identify and confirm from our point of view what the causes are."

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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