August 10, 2015 / 4:30 PM / 4 years ago

UPDATE 2-Athabasca cuts output as Alliance gas pipeline shutdown continues

(Adds Alliance update, Chicago gas price reaction)

By Nia Williams

CALGARY, Alberta, Aug 10 (Reuters) - Athabasca Oil Corp said on Monday it has suspended about 84 percent of its light oil production, the latest Western Canadian producer to curb output after last week’s shutdown of the Alliance Pipeline natural gas mainline.

The Athabasca cut equals 4,200 barrels of oil equivalent a day (boe/d), and comes after Alliance declared force majeure on its 2,400-mile (3,850-km) pipeline after poisonous hydrogen sulphide entered the system.

The mainline delivers gas and natural gas liquids from Western Canada and North Dakota’s Williston Basin to the Chicago market.

It accounts for about a third of Canada’s daily net exports to the United States and the shutdown is expected to last several more days.

The pipeline company, a limited partnership owned by affiliates of Enbridge Income Fund Holdings and Veresen Inc, called on shippers to suspend injections on Friday so the affected gas could be flared off.

Alliance began flaring at its mainline block valve station near Arcola, Saskatchewan, on Sunday and will add incremental flares at its Alameda compressor station downstream, the company’s manager of commercial and government affairs, Tony Straquadine, said.

“We will continue to work to measure gas as we are flaring it to safely remove the hydrogen sulphide from our system,” Straquadine added.

Alliance intends to buy natural gas to replace the volumes lost in the flaring process and help restart the pipeline quickly.

Gas prices in Chicago were little changed given the high number of other pipelines feeding into the Midwest region and near normal temperatures for this time of year.

Chicago gas prices rose 1.7 cents to $2.92 per million British thermal units.

Athabasca said it managed to shift a portion of its production from the Kaybob region in west central Alberta to other pipeline systems.

It joins a number of other oil and gas producers, including Seven Generations Energy and NuVista Energy Ltd , that have been forced to trim some or all production.

Athabasca said five days of downtime on the Alliance pipeline would cut its third-quarter light oil production guidance of 5,000 boe/d by approximately 250 boe/d.

The hydrogen sulphide gas entered the system as a result of complications experienced by an upstream operator that Alliance did not name.

However, Keyera Corp said it had a brief operational upset last Wednesday at its Simonette, Alberta, gas plant, which resulted in gas that did not meet sales gas specifications entering the Alliance pipeline. (Editing by Alan Crosby, Frances Kerry and Peter Galloway)

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