Husky Energy has reduced capital expenditures by an additional $700 million and shut in negative cash margin production in continued efforts to counter market conditions caused by COVID-19. Husky’s plan includes reducing and deferring all discretionary capital spending as well as reducing production and refinery throughput to address near-term negative cash margins until supply and demand are rebalanced.
Husky previously announced 2020 spending reductions of $1 billion, including $900 million in capital expenditures and $100 million in cost-saving measures. Both rounds of capital spending cuts focused exclusively on Husky’s upstream.
Husky continues to shut-in production across its Integrated Corridor business. To date, Integrated Corridor production has been reduced by more than 80,000 b/d, most of which is heavy oil, with the ability to reduce even further while preserving the option to quickly ramp back up should pricing conditions allow. Husky’s Integrated Corridor includes upstream and downstream operations in western Canada and the US.
The company is aligning Integrated Corridor crude production with upgrading and refining requirements as throughput is adjusted in line with changing market conditions. US refinery throughput has been reduced by around 95,000 b/d, to about 40% below maximum capacity.
Husky has deferred a planned turnaround of its Lloydminster upgrader, scheduled to begin in April 2020 to late third-quarter 2020, given the current safety and public health risks inherent in mobilizing and maintaining a large construction workforce during the COVID-19 pandemic. Maintenance work at the upgrader will proceed where necessary and safe, and operations and throughput will be modified in accordance with maintenance requirements. A project to increase diesel production to nearly 10,000 b/d from 6,000 b/d has also been deferred to late third-quarter 2020.
The company suspended rebuild construction at its 47,500-b/d refinery in Superior, Wis., due to the COVID-19 pandemic. A fire broke out at the site in 2018, prompting the rebuild (OGJ Online, Apr. 26, 2018). Demolition of damaged equipment was largely completed as of September 2019. The refinery had been scheduled to return to full operations in 2021.
Husky has reduced Lloydminster thermal bitumen production, including the Tucker thermal project, due to anticipated production backlogs in western Canada as North American refinery throughputs adjust to the dramatic stall in product consumption. Commissioning activities still are being completed at the 10,000-b/d Spruce Lake Central thermal project. Startup depends on improved pricing conditions. Construction of the project, originally scheduled for completion around end-2020, has been suspended, and additional Lloydminster projects to be delivered beyond 2020 have been deferred.
The company deferred a major turnaround scheduled to start at its Sunrise Energy project 60 km northeast of Fort McMurray, Alta., in April due to COVID-19. Other maintenance work at Sunrise will proceed where necessary and safe to do so, with operations and production modified in accordance with maintenance requirements. Husky operates Sunrise and its partner operates the jointly-owned BP-Husky Toledo refinery near Toledo, Ohio.
Sunrise has estimated total proved, probable, and possible reserves of 3.7 billion bbl (estimated as of Dec. 31, 2009). Production from Sunrise is shipped to Toledo via pipeline.
Husky is reducing or shutting-in western Canada oil and gas production. No further capital expenditures are planned in 2020.
The company also suspended major construction activities related to its West White Rose project. Production at the main White Rose field continues, with enhanced workforce control measures designed to ensure safe operations on the SeaRose floating production, storage, and offloading (FPSO) vessel. Husky has a 72.5% working interest in White Rose field and a 68.8% working interest in the satellite extensions, including West White Rose.
Husky is reviewing its planned drydock of the Terra Nova FPSO and alternatives for completing maintenance work and asset-life extension. Husky has a 13% working interest in Terra Nova oil field. White Rose and Terra Nova are both in the Atlantic Ocean east of Newfoundland.
Production at Husky’s Liwan gas project offshore China has returned to full rates following an extended Chinese New Year break related to the COVID-19 pandemic. Husky has a 49% working interest in Liwan 3-1 and Liuhua 34-2 fields.
Liuhua 29-1 field at Liwan is advancing towards first production by end-2020. Husky holds a 75% working interest in the field, which once fully ramped up will add about 9,000 boe/d to its fixed-price Asia Pacific production.
Husky’s BD project in the Madura Strait offshore Indonesia has returned to full rates following planned first-quarter 2020 maintenance. Husky has a 40% working interest in BD.
Christopher E. Smith | Editor in Chief
Christopher brings 27 years of experience in a variety of oil and gas industry analysis and reporting roles to his work as Editor-in-Chief, specializing for the last 15 of them in midstream and transportation sectors.