(Adds Syncrude production cuts, market reaction)
By Nia Williams
CALGARY, Alberta, March 16 Syncrude Canada
notified customers on Thursday that its oil sands plant in
northern Alberta would cut production by more than 50 percent in
March and April after a fire this week, four trading sources
News of the reported production cuts boosted the premium of
light synthetic crude from the oil sands for April delivery,
which had already soared to its highest premium over U.S. crude
in nearly a year. Syncrude spokesman Will Gibson declined to
The fire, extinguished on Thursday morning, had raised
concerns in the market over tighter supply. The fire broke out
on Tuesday afternoon after a line failure caused a treated
naphtha leak, prompting an evacuation of the Syncrude site. One
worker was injured but in stable condition at the Edmonton
On Thursday, the trading sources said the company notified
customers that it was going to reduce volumes by more than 50
percent this month and next, which comes out to be roughly 6
million and over 5 million barrels, respectively.
Syncrude said in a statement earlier in the day that crews
were still working to fully isolate the affected area of the
Mildred Lake upgrader to allow safe entry to assess damage and
develop a repair strategy.
"In addition, this will enable both Syncrude and agencies,
including Alberta Occupational Health and Safety, to conduct
full investigations to understand exactly what happened and help
prevent future incidents," the company said.
Other operations remained stable at the 350,000 barrel per
day mining and upgrading facility roughly 40 kilometres north of
the oil sands hub of Fort McMurray. It processes mined bitumen
into refinery-ready synthetic crude.
On Tuesday, firefighters brought the blaze under control
within hours but it was allowed to burn through Wednesday to get
rid of residual fuel. Several upgrader units were shut or
running at reduced rates, while mining and extraction were being
paced to balance lower bitumen demand, the company said.
Light synthetic crude from the oil sands for April delivery
surged to $4.00 a barrel over the West Texas
Intermediate benchmark in illiquid trade, according to Shorcan
Energy brokers. It was the highest since the end of May, when
the premium spiked as uncontrolled wildfires in the region
forced a number of oil sands plants to shut down as a
It had settled on Wednesday at $1.90 a barrel over U.S.
Syncrude is majority-owned by Suncor Energy, while
Imperial Oil provides operational, technical and
business management support.
(Reporting by Nia Williams in Calgary, additional reporting by
Catherine Ngai in New York; Editing by David Gregorio)