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Financial Post: Fire at Syncrude oilsands upgrader hits output

Jon Harding, Financial Post 
Published: Friday, December 07, 2007

CALGARY — A unit that upgrades oilsands bitumen into synthetic crude oil at the giant Syncrude Canada Ltd. oilsands joint-venture will be shut down for the next two-to-four weeks following a fire early Monday, impacting output.

Repairs are underway and there were no injuries after the fire ignited inside the Coker 8-3 unit, Syncrude’s newest upgrading facility.

The joint-venture’s largest partner, Canadian Oil Sands Trust, said Friday the fire occurred in an area of the plant called the electro-static precipitators, where fine dust particles are knocked from the coker flue gas.

The trust has slightly adjusted its production guidance for the year, saying annual production will fall into a range of between 110 million barrels and 111 million barrels, compared with guidance offered on Oct. 31 of a production range between 108 million barrels and 114 million barrels.

Imperial Oil Ltd., ConocoPhillips, Mocal Energy Ltd., Murphy Oil Co. Ltd., Nexen Inc. and Petro-Canada are other owners of the joint-venture.

Meanwhile, Royal Dutch Shell PLC said Friday output of refined products such as gasoline and diesel from its Scotford refinery near Edmonton has returned to full rates following a fire at the company’s Scotford upgrader two weeks ago.

The upgrader processes bitumen from the oilsands into synthetic crude, which it then feeds to the refinery.

“We’re at full capacity [the ability to refine 100,000 barrels of synthetic crude a day] at the refinery and all of our customers’ needs are being met,” said Shell spokesman Randy Provencal.

Shell has been buying synthetic crude from other sources, including from Syncrude, for the refinery, as repairs of one of two residue hydroconversion units shut down by the fire take place. The unit inside the upgrader is expected to be back running later this month.

“Syncrude’s situation could have an impact on us,” Mr. Provencal said. The Shell upgrader normally processes 155,000 barrels of bitumen a day but continues to operate at minimal rates in the aftermath of the Nov. 19 fire.

Both fires and the resulting decline in Canadian synthetic crude production sent the price of Syncrude’s top product soaring, well above benchmark West Texas Intermediate oil, which Canadian synthetic often sells at a premium to.

The premium increased to US$6 late Thursday for the first time in five months, according to data from Bloomberg News, and left traders wondering if Syncude oil could reach the US$100 plateau before WTI in coming days.

The price for Syncrude rose US$3.74, or 4%, to US$96.23 a barrel Thursday, well above the day’s closing price for WTI of US$90.23. Oil prices were falling on Friday on speculation that United States stockpiles are sufficient to meet winter demand.

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