By the end of March, Fort Hills was producing over 100,000 bbls/d, Teck Resources Limited noted this morning in its Q1 results.

Oil production from the first of three secondary extraction trains commenced on Jan. 27, followed by the second train on March 23.

“By the end of March, Fort Hills was producing over 100,000 barrels per day of PFT bitumen. The last secondary extraction train and the last solvent recovery unit are scheduled to be completed and commissioned in the second quarter of 2018 and total production is expected to reach full capacity by the end of 2018,” the company noted.

Systems in operation are currently running well and plant start-up has exceeded expectations with respect to both production volumes and product quality, Teck said.

Fort Hills produced five million bbls of bitumen in the first quarter, including the production of froth used for commissioning. Teck’s share of that production, including froth, was 1.1 million bbls, which is in line with the company’s annual guidance. Teck’s share of blend sales for the period was 400,000 bbls. Its downstream logistics arrangements have performed as expected.

The secondary extraction paraffinic froth treatment process allows Fort Hills bitumen to be blended and delivered directly to customers without further upgrading. As a result, the Fort Hills bitumen will require less blending diluent to meet pipeline specifications. Further, it will be among the lowest life cycle carbon intensity of any Canadian oilsands production, with a lower carbon intensity than about half of the oil currently refined in the U.S., Teck said

In the first quarter, the company’s share of Fort Hills capital expenditures were $136 million, including $13 million for major enhancements, $5 million for sustaining capital and $118 million in construction and infrastructure costs.

“We continue to capitalize all revenue and costs associated with the project as work continues to complete the project. Accordingly, we capitalized an additional $71 million of costs net of pre-production revenues during the final construction and ramp-up phase,” Teck stated. “We will begin to record operations in profit and loss when the project is available for full operation, which is expected during the second quarter.”

Frontier project

The regulatory application review of Frontier is continuing with a federal-provincial panel reviewing information filed to date. The regulatory review process is expected to continue through 2018, making 2019 the earliest a federal decision statement is expected for Frontier. Teck’s expenditures on Frontier are limited to supporting this process. “We continue to evaluate the future project schedule and development options as part of our ongoing capital review and prioritization process,” the company said.

Outlook

Teck continues to expect its share of 2018 bitumen production to be in the range of 7.5 million to nine million bbls, with a range of 12,000 to 20,000 bbls/d in the second quarter, 24,000 to 28,000 bbls/d in the third quarter and 32,000 to 36,000 bbls/d in the fourth quarter.