(Recasts with operation not likely to shut down)
By Nia Williams
CALGARY, Alberta, Aug 19 (Reuters) - Canada's largest
synthetic crude project is not likely to shut down operations,
its biggest owner said on Wednesday, even as a company
presentation showed it is losing about $6 for every barrel it
produces.
Syncrude Canada Ltd, a joint venture project in northern
Alberta at which mined oil sands bitumen is upgraded into
refinery-ready synthetic crude has a break-even production costs
of C$57 ($43.46) a barrel, according to a presentation from
Siren Fisekci, vice president of investor and corporate
relations.
That is around $6 higher than the current outright price for
synthetic crude, which yesterday settled at $37.37 a barrel.
Synthetic crude has been below $43 a barrel since early August
as its discount to benchmark U.S. crude SHRSYNMc2 widened and
global oil prices CLc1 LCOc1 dived.
The cost to COS to produce Syncrude's fully upgraded oil is
even steeper at C$62 ($47.27) a barrel once interest payments,
administration, insurance and other costs are added in,
according to the presentation at the EnerCom Oil and Gas
conference in Denver, Colorado.
Canada's oil sands, home to the world's third-largest oil
reserves, also feature some of the highest operating costs and
lowest prices in the world. Benchmark Canadian heavy crude has
collapsed to 12-year lows at near $20 a barrel, raising
questions about whether some operators would simply shut down to
wait out the slump rather than carry on pumping at a loss.
Even so, Canadian Oil Sands Ltd COS.TO , the
largest-interest owner in the 326,000 barrel per day Syncrude
mining and upgrading venture, said shutting in production is not
something the company would consider.
"From COS' perspective we believe the costs to shut in and
later restart production are very significant. This is the case
for most if not all oil sands projects," said Scott Arnold,
director of investor and corporate relations at COS.
"Shutting in production is not something COS would
contemplate, even at current spot prices."
Break-even costs include operating expenses, regular
maintenance, capital expenditures, crown royalties and
development expenses and reclamation, according to the COS
presentation.
Upgrading bitumen into synthetic crude adds extra expense,
but the unusually detailed breakdown of costs underlines the
difficulties facing all producers in northern Alberta.
Syncrude is a joint venture of seven partners: COS, Suncor
Energy SU.TO , Imperial Oil IMO.TO , Mocal Energy, Murphy Oil (NYSE:MUR)
MUR.N , CNOOC subsidiary Nexen 0883.HK and China's Sinopec
600028.SS .
Arnold added any decision to shut in production would be
made by all the Syncrude owners, who may each have different
opinions on the matter.
($1 = 1.3115 Canadian dollars)
(Editing by James Dalgleish)