Nexen to lay off 350 workers after suspending oil sands repairs

A man walks into the Nexen building in downtown Calgary, Alberta, July 23, 2012. REUTERS/Todd Korol

CALGARY (Reuters) - Nexen Energy will lay off 350 employees after suspending plans to repair its Long Lake oil-sands upgrader in northern Alberta, which was damaged by a deadly blast in January, executives said on Tuesday.

Repairs on the facility, which processes bitumen to make light, synthetic crude oil, is not feasible in the short term, Ron Bailey, senior vice president of Nexen’s Canadian operations, said in a news conference on Tuesday.

Nexen will continue ramping up its bitumen production, targeted at 27,000 barrels per day, following wildfires in May that shut production, while putting its Long Lake Upgrader in winter preservation mode. A target date for returning the upgrader to full service has not been set.

The decision means the company, a wholly owned subsidiary of China’s CNOOC Ltd, will lay off workers from Calgary and its Long Lake site by year end.

The January blast, which occurred in Long Lake’s hydrocracker unit, resulted in the death of two employees. A stop-work order following the explosion also forced Nexen to shut down its upgrader and suspended thermal steaming operations, resulting in a halt to production.

On Tuesday, the company said the incident resulted from work that was “outside of the scope of approved work activities.”

Reporting by Catherine Ngai; Editing by Leslie Adler and Jonathan Oatis