Canadian Natural Resources decides to move forward with the Kirby North project
The entire oil and gas industry has faced a difficult time with low oil prices since late 2014, but perhaps none more than oil sands producers, which were forced to put off high-cost projects as oil prices rapidly declined. Companies like Canadian Natural Resources (ticker: CNQ), which produced 104.9 MBOPD of crude from its Horizon Oil Sands mining project in Q3, were forced to put future projects on hold as the value of oil fell into uneconomic territory.
In the company’s third-quarter press release Thursday, CNQ said that it now feels confident enough to restart the development of its Kirby North oil sands project, and start the third phase of the Horizon expansion. The restart of Kirby North is the first example of an oil sands producer restarting a deferred major project since the crash in oil prices at the end of 2014.
The 40 MBOPD Kirby North project was put on hold in 2015, along with nearly 20 other oil sands projects belonging to other producers. Canadian Natural Resources already invested C$700 million (US$522.66 million) into the project, and plans to finish the project now that costs have come down and CNQ feels prices are more stable.
“All of the equipment and all of the engineering has been done,” said CNQ President Steve Laut during an interview. “So really now it’s all about execution, how we do the construction, put all the components together and drill all the wells. We feel very confident we will be able to drop the costs significantly.”
During the company’s conference call, Laut said the lower costs would be accomplished by leveraging the company’s infrastructure, which it has grown through a series of tuck-in acquisitions. “In a $45 world, Kirby North creates value for shareholders,” said Laut. CNQ’s president added that the company expects first steam in Q3 2019, and first oil in Q1 2020.
Phase 2B on Horizon complete with Phase 3 set for completion in Q4 2017
In addition to the news that Canadian Natural Resources plans to restart the development of Kirby North, the company also announced today that it completed Phase 2B of the Horizon expansion, and that it plans to complete Phase 3 before the end of next year. Phase 2B added about 45 MBOPD of production to the oil sands project, bringing total daily production to 175,000 barrels, according to the company.
The third phase of the Horizon expansion will add another 80 MBOPD of production to the project. Canadian Natural Resources plans to spend approximately $1 billion on Phase 3, which will bring the facility to its designed capacity of 250 MBOPD. CNQ added in its quarterly report that the targeted operating cost for the project will be below US$20.00 per barrel once completed.
