By Devika Krishna Kumar and Rod Nickel Reuters March 6, 2020
A tailings pond near the Syncrude tar sands operations near Fort McMurray
NEW YORK (Reuters) - Canada's Syncrude oil sands facility has declared force majeure after a fire on Sunday at the plant and told customers it will reduce production by about 20%, sources familiar with the matter said.
Syncrude is a joint venture majority-owned by Suncor Energy Inc, with minority stakes held by Imperial Oil Ltd and others. The facility upgrades thick bitumen to light oil.
Canada is the world's fourth-largest oil producer and Syncrude's nameplate capacity of up to 360,000 barrels per day (bpd) represents about 10 percent of the country’s supply.
The fire happened on Sunday in one of Syncrude's hydroprocessing units at its Mildred Lake, Alberta, upgrading facility, spokesman Will Gibson said. He said the building was empty at the time of the fire, and its cause is unknown.
No one was injured, he said.
Gibson declined to comment on the production impact.
Force majeure is a declaration that unforeseeable circumstances prevented a party from fulfilling a contract.
"We're working with the operator, Syncrude, to better understand the situation," Suncor spokeswoman Sneh Seetal said.
Canadian oil prices strengthened due to the production cuts, with light synthetic crude for March delivery flipping from a discount to trade at a premium of $3.50 per barrel over West Texas Intermediate (WTI) on Thursday, market sources said.
Prices for April strengthened to settle at $3.10 over WTI on Thursday, wider than Wednesday's settle of $2.10 over, according to NE2 Canada Inc. The contract traded at $2.90 on Friday.
Syncrude, one of the largest producers of crude oil from Canada's oil sands, has had several operational issues in recent months. In January, the company declared force majeure due to extreme cold weather in western Canada while in December, the company reduced production by 1.6 million barrels due to disruptions.
Earlier last year, Syncrude cut October synthetic crude sales by 1.4 million barrels because planned maintenance at the plant was extended.
Asked about ongoing operational issues at Syncrude, which started operations in 1978, Gibson said the company was focused on being "reliable and responsible."
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