Cnooc Ltd.’s Nexen Energy unit will eliminate 350 jobs this year after deciding not to repair its Long Lake oil-sands upgrader in northern Alberta following an explosion in January.
The facility, which processes bitumen into light synthetic crude oil, can’t be feasibly repaired in the short term, executives said on a call with reporters on Tuesday. Workers will lose their jobs at Long Lake and at the Calgary headquarters. Nexen will continue producing bitumen from Long Lake, resulting in lower costs, as well as improved reliability and safety, the company said. It plans to make a final decision about returning the upgrader to service later this year, taking into consideration changing market conditions.
The explosion of a hydrocracker in the upgrader that killed two employees is among recent challenges for Cnooc in Canada after its 2013 takeover of Nexen. Nexen also contended with a pipeline leak last year at Long Lake and a wildfire in May that forced oil-sands production offline. Bitumen output from the site is ramping up from just under 15,000 barrels a day currently to a targeted 27,000 barrels a day in the next month after the outage from the fire. Despite the hurdles, Nexen said it remains committed to growing production in Canada, including in the oil sands.
“We are facing extremely tough market conditions since mid-2014 and it’s tough for the whole industry,” Fang Zhi, chief executive officer of Nexen, said on the call. “We continue to see Nexen as a significant platform for the international development of Cnooc’s business.”