Commodities: Alberta Regulator Lifts Suspension Order on Cnooc Oil-Sands Plant

By Chester Dawson 
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CALGARY, Alberta–The chief energy regulator in oil-dependent Alberta province lifted a suspension order impacting a plant operated by the Canadian unit of Chinese state-controlled energy giant Cnooc Ltd., but said late Friday that a related investigation into a pipeline breech is ongoing.

The Alberta Energy Regulator rescinded its suspension targeting 24 pipelines at Cnooc subsidiary Nexen Energy ULC’s Long Lake oil-sands facility, but kept a shut-down order for several other pipes, including one that ruptured this summer and connects to smaller oil-sands plant nearby, according to a spokesman.

Nexen said in a statement on Thursday that the remaining pipelines under suspension “are discontinued and not required for operations” at its troubled 50,000 barrel-a-day Long Lake operation, which was forced to curb production after authorities imposed the order after a pipeline spill was detected in July.

The provincial energy regulator initially imposed the ban for what Nexen itself termed its “non-compliance” with rules on documenting pipeline maintenance, effectively rendering Long Lake inoperable. The AER scaled back its suspension last month after receiving assurances the facility could be operated safely.

The regulatory action was the latest setback for the Long Lake plant, which started up in 2008 but has never reached its capacity of 72,000 barrels a day. That has proved a challenge for parent company Cnooc, which bought Nexen for $15 billion in 2013 and installed its own management team to run it last year.

In July, Nexen cut its production by 9,000 barrels a day after the pipeline incident that spilled 31,500 barrels of crude oil, wastewater and sand from its Kinosis oil-sands project adjacent to Long Lake in northern Alberta’s boreal forests.

Representatives for Nexen weren’t available for comment on the current status of Kinosis or the cause of the pipeline spill.

The industry-funded AER has launched a probe into that spill and its response has been watched closely by both the Canadian energy industry, whose reputation for pipeline safety has suffered a black eye from the leak, and critics of Alberta’s track record enforcing environmental regulations.

Write to Chester Dawson at chester.dawson-wsj.com