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Canada’s Biggest Producer Cuts Heavy Oil Drilling

Canada’s Biggest Producer Cuts Heavy Oil DrillingCanada’s Biggest Producer Cuts Heavy Oil Drilling

Canada Natural Resources, the largest producer, is allocating capital to lighter oil drilling and is curtailing heavy oil production, as the price of Canadian heavy oil tumbled to a nearly five-year-low relative to the US benchmark price.

Due to transportation bottlenecks, the discount at which Western Canadian Select—the benchmark price of oil from Canada’s oil sands delivered at Hardisty, Alberta—trades relative to WTI has been more than $20 this year, Oil Price reported.

On Thursday, that discount blew out to $30.80 a barrel—the largest WCS-WTI differential since December 2013, according to data compiled by Bloomberg.

Canada Natural Resources said on Thursday in its Q2 results release that its North America crude oil and natural gas liquids production in the second quarter dropped by 3% from the first quarter of 2018, primarily as a result of production curtailments and shut-in volumes of around 10,350 bpd as well as reduced drilling activity and ramp up of certain primary heavy crude oil wells drilled in Q1 and Q2.

“Due to current market conditions, the company has exercised its capital flexibility by shifting capital from primary heavy crude oil to light crude oil in 2018, resulting in an additional 7 net light crude oil wells targeted to be drilled in the second half of the year.

Primary heavy crude oil drilling was reduced by 24 net primary heavy crude oil wells in Q2/18, with an additional 35 primary heavy crude oil well reduction targeted for the second half of the year,” Canada Natural Resources said.

 

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