CALGARY — Oilsands companies are restoring thousands of barrels of daily production to take advantage of higher oil prices as relaxed pandemic measures allow North American consumers to get back on the road.
Executives speaking at a TD Securities energy conference on Tuesday said they are confident the oil price crisis is subsiding — while expressing dismay at recent setbacks for oil pipelines in the United States.
“I believe we’ve made it by far through the worst of the situation and, as we see commodity prices grow, we’re seeing a strong price signal to bring production back,” said Alex Pourbaix, CEO of Cenovus Energy Inc.
The Calgary-based company stopped about 60,000 barrels per day of crude production and halted crude-by-rail shipments as prices fell in March and April, but has since restored about half that, Pourbaix reported.
Cenovus is also making deals with other producers to add to the amount it is permitted to bring to market under Alberta’s oil curtailment measures, he added, thus allowing even more output to be restored.
In a separate session, Suncor Energy Inc. CEO Mark Little said he expects a ”downstream-led recovery” as consumer demand sparks increased throughput from its Canadian refineries. That consumer-led demand will then translate into more production from its oilsands and other “upstream” assets.
He didn’t say when he expects to reverse Suncor’s oil production cuts, which included going to one production train from two at its 194,000-barrel-per-day capacity Fort Hills oilsands mine.
Husky Energy Inc. has restored about 40,000 bpd of the 80,000 bpd in oil production it took offline as demand for products produced at its U.S. refineries rises, said chief financial officer Jeff Hart at the conference.
“We continue now to bring up both our upstream and downstream production in concert with one another and in concert with where we see the end demand,” he said, noting full restoration is expected in July or August.
The recovery in consumer demand is boosting confidence at Imperial Oil Ltd. as well, CEO Brad Corson told the conference, without giving production specifics.
He said his company, which is 69.6 per cent owned by Exxon Mobil Corp., is seeing strong markets for its gasoline and diesel products, but jet fuel demand remains about 70 per cent lower than it was at this time last year.
Imperial and Suncor both own refineries in Eastern Canada that have been affected by disruptions on Enbridge Inc.’s Line 5 pipeline through the Great Lakes.
Enbridge shut down both legs of the pipeline last month after noticing a disturbance to an anchor support on its underwater east leg in the Straits of Mackinac.
The west leg was restarted, then ordered shut down by a judge at the request of state Attorney General Dana Nessel (who has also asked for a preliminary injunction that could keep Line 5 closed indefinitely).
Last week, the judge allowed the west leg to reopen but the other leg remains closed until more testing is completed.
Suncor’s Little said ongoing efforts by Michigan state politicians to retire Line 5 over fears of environmental damage if it leaks pose a “huge potential threat” for consumers in Michigan as well as Ontario and Quebec.
He said Suncor has the option to use rail and ships to transport oil to its refineries at Sarnia, Ont., and Montreal, but that drives up costs and will have an affect on consumers.
Corson said Line 5 is “integral” to getting crude to its Ontario refineries at Sarnia and Nanticoke but the company has developed a contingency plan using rail and ships in case there is a prolonged disruption.
On Monday, the U.S. District Court for the District of Columbia said the three-year-old Dakota Access pipeline that takes oil from North Dakota to an Illinois hub must shut down by Aug. 5 because a crucial federal permit fell short of National Environmental Policy Act requirements.
If the pipeline is closed, it would affect Calgary-based Enerplus Corp., which produced 50,872 barrels of oil equivalent per day in North Dakota in the fourth quarter of last year.
In a session at the conference, CEO Ian Dundas said there is plenty of crude-by-rail transport from the state but a pipeline shutdown would hurt profitability because rail transport costs $6 to $8 more per barrel than pipeline.
Enerplus’s shares fell by as much as 7.5 per cent in Toronto on Tuesday to $3.19.
Cenovus’s Pourbaix said the Dakota Access ruling will make it difficult to build any major American infrastructure — including highways and high-voltage power lines — going forward.
“If there’s an opportunity to come back on those regulatory decisions years after the fact, I think that’s a real significant problem,” he said.
This report by The Canadian Press was first published July 7, 2020.
Companies in this story: (TSX:SU, TSX:ENB, TSX:IMO, TSX:HSE, TSX:CVE, TSX:ERF)
Dan Healing, The Canadian Press