Canadian Natural Resources said on Tuesday its Horizon oil sands operation has resumed production after a seven month gap caused by a fire.
The Calgary-based company said expects to reach full capacity of 110,000 barrels per day of syncrude – a light oil manufactured from bitumen – by next week. The Horizon outage led to a shortage of syncrude which helped Alberta’s producers attract a premium of $18 above benchmark US oil.
That premium is now shrinking and is set to return to normal levels of a slight discount. Last week the spread between US crude and North Sea Brent reached a record margin of $26 a barrel. Western Canada Select in turn trades at $13 a barrel below US levels which on Tuesday was $84 a barrel.
Canadian Natural Resources president Steve Laut said earlier in the month: “When we bring Horizon on, I would expect that premium to shrink – and we normally get about a $1 discount.” The company is also planning to more than double capacity at Horizon at a cost of $2 billion.
Canada exports 2 million barrels Canada exports two million barrels of crude to the US per day of which 1.5m come from Alberta’s oil sands. The strength of the Canadian currency erodes further the prices attained by oil sands producers. The Canadian currency was trading at US$1.01 on Tuesday versus recent highs of $1.06 and has strengthened by over 12% in two years. The loonie hit a low of 78c to the greenback at the start of 2009.
Canada's oil industry is betting on two massive pipeline projects to take its oil to world markets where it can attain a better price. The Northern Gateway project could send 220 tankers laden with crude to markets in Asia via a port in British Columbia if go-ahead is received to built the pipeline from Alberta's interior to the coast. The Keystone XL pipeline, which would take Canadian oil to refineries on the US Gulf Coast could also up prices for oil sands products. A decision on Keystone which now lies with the White House is expected in November.