Tar sands/oil sands producers that have postponed scheduled maintenance while trying to live within diminished cash flows over the last two years now face a “tsunami” of overdue and unpredictably costly work, according to industry news digest JWN Energy.
“While there is no evidence that producers have deferred production outages required for regulatory inspections,” the outlet reports, “a significant amount of maintenance has been delayed over the last two years, resulting in accumulated work that Asset Performance Networks Canada Managing Director Mike O’Kane describes as an oncoming tsunami.”
There comes a point when shutdowns for maintenance—“turnarounds” in oilpatch-speak—cannot be delayed any further. And then, said O’Kane, the price of delay becomes apparent. “Sooner or later you have to do it, so you end up with a much more complex, much more difficult event to successfully execute,” he said.
After years of delay, the analyst added, many producers now face “at least one major turnaround every year, and in some cases they’ll have more than one, just because this work has built up and accumulated and they’ve got to get it done.”
The shutdowns aren’t simple. They typically take more than a million hours of skilled trade time, O’Kane noted, and are “very, very difficult to do,” even on “a reasonable budget and a reasonable schedule.” Due in part to the constraints imposed by remote work sites, Asset Performance Canada found in a 2014 study that turnarounds in the tar sands/oil sands “can be as much as 80% more expensive than major facility turnarounds on the U.S. Gulf Coast.
“About 30% of high complexity turnarounds are what we would call a train wreck, meaning that they missed their budget or their schedule by at least 30%,” O’Kane said. “You’re an outlier if you are able to do them successfully.”
There’s one paradoxical lifeline for the producers, JWN suggests: Investors’ unwillingness to greenlight new tar sands/oil sands projects may mean less demand for the same skilled trades needed to execute turnarounds, possibly cooling labour costs for the jobs.