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Canadian Natural Resources Plans to Check Wells Following Leaks

Canadian Natural Resources Ltd. (CNQ) said it’s taking steps to improve the safety of its Primrose oil-sands project in Alberta after a series of spills.

The Primrose project began to leak more than 6,000 barrels of oil-sands bitumen emulsion starting in May and is still leaking at a slow pace. Regulators have said the area’s geology may have contributed to another four years ago. Canadian Natural said the recent leaks came from failures at four older well bores that had been abandoned, and that it can prevent others by testing wells on the site and fixing weaknesses.

Primrose produced 109,000 barrels a day during the first quarter, 16 percent of total production for Calgary-based Canadian Natural, which is Canada’s third-largest energy company by market capitalization. Primrose was among the company’s highest-return projects, according to Canadian Natural’s May 3 first-quarter earnings release.

“What we’re going to do is go back and look at the wells in the vicinity of these leakages,” Canadian Natural President Steve Laut said in a phone interview. “If we see any imperfections we are going to go back and try to remediate those wells. And if we can’t, then when we do steam through those areas, we are going to change our steaming practices to ensure we prevent these kinds of events.”

Steam Injection

Primrose is a steam-injection oil-sands project, which means that hot water steam is injected underground at high-pressure to separate the thick, tarry bitumen oil from sand so it can be pumped to the surface.

The company said it believes it will achieve its 2013 guidance of 100,000 to 107,000 barrels a day for steaming operations including Primrose, although it expects modified steaming strategies will reduce its 2014 guidance by about 10,000 barrels a day.

Production from steam-injection projects made up the majority of Alberta’s 1.9 million barrels a day of oil-sands production for the first time last year, the Alberta Energy Resources Conservation Board said in a May 8 report.

Canadian Natural also blamed the 2009 leak at Primrose on well-bore failure. In a report on that spill released in January, the ERCB said “a contributing factor in the release may have been geological weaknesses in combination with stresses induced by high-pressure steam injection.”

Cara Tobin, a spokeswoman for the Alberta Energy Regulator, the successor agency to the ERCB, said in a phone interview that regulators are still investigating the cause of this year’s spills.

Shale Thickness

Laut said that the thickness of the Upper Colorado Shale caprock at Primrose prevents any leaks of either pressurized steam or bitumen from the project. But if there’s a leak from a well-bore failure, bitumen can seep to the surface through natural vertical fractures in the Colorado caprock.

The leaks at Primrose were caused by the high-pressure steam and bitumen emission seeping to the surface over several weeks through those natural fractures, Laut said.

The leaks in the most recent incident came from two well-bore failures in May and two in June, according to the Alberta Energy Regulator. Laut said the rate of the leaking has declined as Primrose has depressurized, and is now down to less than 20 barrels a day in total from all four leak sites, being collected as it reaches the surface. The company has most of the spill cleaned up, with about 6,300 barrels of bitumen emulsion gathered so far, Laut said.

In a release, Canadian Natural said there have been very few incidents in more than 30 years of using steam-injection production at Primrose, and that future incidents can be avoided by repairing potential well-bore failures and changing steaming methods around well bores that can’t be fixed.

Canadian Natural shares rose 17 cents to close at C$31.83 ($30.97) on the Toronto Stock Exchange.

To contact the reporter on this story: Edward Welsch in Calgary at ewelsch1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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