Cut­ting Back

Fort McMurray Today - - FRONT PAGE -

CNRL cuts $1 bil­lion from 2019 bud­get be­cause of low oil prices.

Cana­dian Nat­u­ral Re­sources Ltd. is cut­ting its 2019 cap­i­tal bud­get by about $1 bil­lion due to poor western Cana­dian oil prices but it says it will ramp up spend­ing if prices re­bound.

The Cal­gary-based oil­sands pro­ducer an­nounced Wed­nes­day a 2019 base bud­get of $3.7 bil­lion, be­low its “nor­mal­ized” range of $4.7 bil­lion to $5 bil­lion and about 20 per cent less than this year’s $4.6 bil­lion.

“Our cap­i­tal pro­gram is very flex­i­ble and we can cur­tail cap­i­tal spend­ing down to the $3.1 bil­lion range and still keep pro­duc­tion flat,” said pres­i­dent Tim Mckay dur­ing a we­b­cast from the com­pany’s in­vestor day in Toronto fol­low­ing the an­nounce­ment.

“Should prices im­prove and sta­bi­lize, and we see clar­ity on mar­ket ac­cess, we would look to in­crease our cap­i­tal to ap­prox­i­mately $4.4 bil­lion.”

A glut of oil in Al­berta as pipe­line ca­pac­ity fails to match pro­duc­tion in­creases is blamed for dra­mat­i­cally lower lo­cal oil prices since last fall.

An­a­lysts praised the bud­get for its re­straint in the cur­rent oil price en­vi­ron­ment and Cana­dian Nat­u­ral shares rose by about 4.5 per cent in early af­ter­noon trad­ing on the Toronto Stock Ex­change.

The 2019 bud­get con­tains $600 mil­lion for long-term growth pro­jects, in­clud­ing the com­ple­tion of the 40,000-bar­rel-per-day steam-driven Kirby North oil­sands project (ex­pected to de­liver first oil in late 2019) and build­ing ad­di­tional multi-well pads at Cana­dian Nat­u­ral’s Prim­rose ther­mal heavy oil project in north­ern Al­berta.

Pro­duc­tion in 2019 is tar­geted to be be­tween 1.03 mil­lion and 1.12 mil­lion bar­rels of oil equiv­a­lent per day, down slightly from this year’s ex­pected out­put, with a prod­uct mix of about 76 per cent oil and nat­u­ral gas liq­uids and 24 per cent dry nat­u­ral gas.

A pro­duc­tion cur­tail­ment pro­gram an­nounced by the Al­berta gov­ern­ment last week­end de­signed to re­move 325,000 bar­rels per day of oil from the prov­ince’s over-taxed pipe­lines has al­ready re­sulted in stronger for­ward crude prices in Jan­uary, Cana­dian Nat­u­ral said.

It plans to mon­i­tor those prices and the progress of the stalled Key­stone XL and Trans Moun­tain ex­pan­sion ex­port pipe­lines to de­ter­mine if spend­ing should be in­creased.

Tech­nol­ogy and op­tions to in­crease fu­ture oil pro­duc­tion took cen­tre stage at the in­vestor day, with Scott Stauth, chief op­er­at­ing of­fi­cer for oil­sands, flesh­ing out Cana­dian Nat­u­ral’s plan re­vealed last spring to test driver­less oil­sands min­ing trucks.

The au­ton­o­mous haulers are al­ready in place at ri­val Sun­cor En­ergy Inc.’s mines and Im­pe­rial Oil Ltd. said re­cently it plans to ex­per­i­ment with up to seven of the trucks at its Kearl mine.

Cana­dian Nat­u­ral plans to spend about $75 mil­lion on a field trial at its Jack­pine Mine in late 2020, Stauth said.

“As­sum­ing we are sat­is­fied with the re­sults of the three-truck trial at Jack­pine, we would con­vert all trucks at Jack­pine to au­ton­o­mous by 2022, fol­lowed by Muskeg River Mine and Hori­zon in 2025,” said Stauth.

“With an in­cre­men­tal cap­i­tal cost of $275 mil­lion to $325 mil­lion, we tar­get our op­er­at­ing costs to be re­duced by 30 to 50 cents per bar­rel once com­plete.”

Cana­dian Nat­u­ral has 18 trucks at Jack­pine and a to­tal of about 140 at all three mines.

The com­pany is en­cour­aged by re­sults from its 500-ton­neper-hour pi­lot project to sep­a­rate bi­tu­men from sand in the min­ing pit us­ing a por­ta­ble pro­cess­ing unit, rather than trans­port­ing it to a cen­tral pro­cess­ing fa­cil­ity, and plans to con­tinue to test it in 2019 be­fore build­ing a larger com­mer­cial-sized plant in 2020, Stauth said.

The tech­nol­ogy could re­duce min­ing costs by $2 to $3 per bar­rel, cut green­house gas emis­sions “sig­nif­i­cantly” through less truck­ing, and re­duce the need for tail­ings ponds, he said.

Stauth said new phases at the com­pany’s Hori­zon oil­sands min­ing and up­grad­ing fa­cil­ity and the pro­posed Pierre River oil­sands project could add 510,000 bpd of syn­thetic oil pro­duc­tion but would only be con­sid­ered if mar­ket ac­cess is­sues are solved.


A haul truck car­ry­ong a full load drives away from a min­ing shovel at Al­bian Sands north of Fort Mcmur­ray, Alta.

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