September 1, 2015 / 9:20 PM / 4 years ago

UPDATE 1-Nexen expects Long Lake oil sands shutdown to take two weeks

(Adds company comments and background, paragraphs 5-12)

By Mike De Souza and Nia Williams

CALGARY, Sept 1 (Reuters) - Nexen Energy, the Canadian subsidiary of Chinese state-owned CNOOC Ltd, is shutting down its Long Lake oil sands operations in northern Alberta in response to an emergency regulatory order, a company spokeswoman said on Tuesday.

Nexen estimated the shutdown process would take up to two weeks as it suspends pipeline operations and attempts to demonstrate to the Alberta Energy regulator that its pipelines are safe.

The provincial regulator ordered Nexen to shut in 95 pipelines at the Long Lake facility last Friday as part of an investigation into one of the largest-ever oil-related pipeline spills on North American soil, discovered in July.

The incident dealt another blow to Canada’s oil sands industry in northern Alberta, which is under fire from environmental groups for its carbon-intensive production process.

Long Lake was producing about 50,000 bpd of bitumen before the spill, which is upgraded on site into refinery-ready synthetic crude. The upgrader also processes raw bitumen from other oil sands projects.

Nexen declined to comment on Tuesday about the impact on production, adding that it does not typically disclose production information on an individual asset basis. Nexen spokeswoman Diane Kossman said the suspension order was not expected to have any material impact on CNOOC’s operations or financial conditions.

Synthetic crude prices rallied hard on Monday after news of the Long Lake shutdown. A separate production outage at the Syncrude oil sands project sent traders scrambling to secure supply, and extended those gains on Tuesday.

The order came three days after Nexen gave the regulator an internal company audit that revealed it was breaking some pipeline safety rules related to maintenance.

“We’re managing the risks associated with safely shutting down this complex and integrated facility,” Kossman said in a statement.

Last week’s order suspended 15 pipeline licences for 95 pipelines that carry a range of products including crude oil, natural gas, salt water, fresh water and emulsion, the regulator said. It is also requiring Nexen to demonstrate that its pipelines can be operated safely.

Nexen apologized for the spill in July, explaining that it would likely take months to find the root cause of the leak, which released more than 31,500 barrels of emulsion, a mixture of bitumen, water and sand.

The regulator said it would not lift the suspension order until the company demonstrates that it can operate its pipelines safely.

Editing by Alan Crosby and Matthew Lewis

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