Cenovus curtails production in response to pipeline capacity constraints

Cenovus Energy is scaling down production at its oil sands facilities due to light-heavy price differentials and pipeline capacity constraints.

The company is also storing excess barrels in its reservoirs as a result of slow growth in crude-by-rail export capacity in Alberta, Canada.

In addition, Cenovus citied difficulties associated with transportation as the reason for reduced prices of its crude oil.

Cenovus Energy president and CEO Alex Pourbaix said: “When Canadian heavy oil is selling at a wide discount to West Texas Intermediate due to transportation bottlenecks, we have significant capacity to store barrels in our oil sands reservoirs to be produced and sold at a later date when pipeline capacity improves and differentials narrow.

“As a prudent response to the current transportation and pricing environment, we’ve been operating our Christina Lake and Foster Creek facilities at reduced production levels since February while continuing to inject steam at normal rates.”

Despite the move, the company expects oil sands volumes for the year to be within its guidance range of 364,000 to 382,000 barrels per day, with oil sands production for Q1 2018 set to be between 350,000 and 360,000 barrels a day.

Pourbaix further added: “We’re taking steps to respond to a critical shortage of export pipeline capacity in Western Canada that is beyond our control and is having a negative impact on our industry and the broader Canadian economy.”

The company has highlighted the need for approved pipeline projects in Canada to overcome transportation bottlenecks.

In addition, Cenovus is contemplating optimisation of the scheduling of maintenance at its oil sands facilities to further soften the impact of pipeline constraints and discounted heavy oil pricing.

Negotiations are also being held with rail providers to address issues related to a shortage of locomotive hauling capacity that is affecting the company’s ability to fully harness its Bruderheim crude-by-rail facility.