Global Institute of Trading

Oil, CAD and Cnooc

Cnooc and how they're helping Canada

Cnooc Ltd was granted permission to resume operation of its long-shuttered Long Lake oil sands upgrader amid a report that the company may exit Canada. The Alberta Energy Regulator approved the company’s application filed five months ago, to start an upgrade that was shut after a fatal explosion in early 2016. Cnooc must submit a timeline for the restart and the plant will be limited to processing no more than 22,400 cubic meters (141,000 barrels) a day of oil sands bitumen, according to an AER document. The company plans to resume operation of the vacuum tower by the end of 2022 or early 2023, according to a separate document submitted to the regulator last month. An email to Cnooc for comment wasn’t immediately returned.

The approval comes as Cnooc — China’s biggest offshore driller — is preparing to exit operations in the U.K., Canada, and the U.S. amid concern the assets could be subject to sanctions, Reuters reported Thursday, citing people familiar with the matter. Restarting the upgrade would allow Long Lake to produce a lighter, more expensive form of crude oil at a time when the company is expanding the site to generate nearly 100,000 barrels a day. The upgrader converts a thick, sticky type of crude called bitumen into a more valuable, lighter one.

But Cnooc being a Chinese off-shore country, how would this be positive for CAD? Well, Long Lake is located in Alberta, Canada. They’ve just approved a $400 million dollar expansion to continue drilling. The taxes, licensing, and costs to run these oil drills in Canada will cost Cnooc hundreds and millions each year going towards the Canadian economy.

What does this mean for CAD strength?

With Europe and the rest of the world putting sanctions and bans on Russia, including their oil, the world needs to up its game in finding and producing oil. With Cnooc now going into production in Canada, this will push buyers to start purchasing more oil from Cnooc which operates in Canada. This is positive for the Canadian economy since a lot of the taxes and production will be happening within Canada. 

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