Canada’s Nexen Apologizes for Oil Pipeline Spill in Alberta
By Chester Dawson
July 17, 2015 3:40 p.m. ET
CALGARY, Alberta—The Canadian unit of a Chinese state-owned company apologized on Friday for a large oil-sands pipeline spill in northern Alberta, the cause of which remains under investigation.
Nexen Energy ULC, bought by China’s Cnooc Ltd. in 2013, discovered the leak on Wednesday and shut down the pipeline after it spilled about 31,500 barrels of heavy crude mixed with sand and water near an oil-sands production facility in a rural area surrounded by boreal forests.
The accident is a black eye to an industry which has touted pipeline safety to ease concerns over energy companies’ efforts to increase pipeline access to global markets. It is also a major setback for Nexen, which has faced years of delays and cost overruns at its oil-sands operations.
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The rupture site is about 9 miles from the remote town of Anzac, which is about 261 miles northeast of Alberta’s capital of Edmonton. The company started cleaning up the spill with vacuum trucks on Friday, saying the two-day delay was because of the lack of access roads.
Alberta’s chief energy authority said the spill posed no immediate risk to humans or wildlife, and hadn’t leaked into any bodies of water. The cause is under investigation, but Nexen officials said they found a finger-sized “visible break” on the buried, 20-inch diameter pipeline.
“We sincerely apologize for the impact this has caused,” Nexen Senior Vice President Ron Bailey said at a news conference in Calgary on Friday. “We will take every step that we see as reasonable and as regulators help us decide what to do to respond to this,” he said.
Nexen said equipment designed to detect leaks remotely failed to work properly and that the leak was discovered by a contractor on site. The company declined to disclose the maker of the double-walled pipe, which was installed early last year.
As a result of the rupture, Nexen has shut-in about 9,000 barrels a day of crude production at its Kinosis oil-sands project, which started up in December. The pipeline closure hasn't affected its nearby Long Lake site and 50,000 barrel-per-day upgrader facility for processing heavy crude into lighter grades of oil, it said.
Nexen didn't provide a cost estimate for the outage and said Kinosis would remain shut-in until the investigation is completed and the pipeline is repaired.
“It’s going to take us some time,” Mr. Bailey said.
The production site, known as Kinosis 1A, received approval from Alberta’s energy regulator in 2012 and construction began the following year. Cnooc said it has regulatory permits to produce as many as 70,000 barrels a day at Kinosis.
Another new oil-sands site, called K1B, was in the engineering design phase until earlier this year when Nexen slowed work on it as part of a cost-cutting campaign to cope with a slide in global crude oil prices.
