MEG Energy unlikely to expand oilsands project with Line 3 pipeline delays

An oil worker holds raw sand bitumen near Fort McMurray, on July 9, 2008. .
An oil worker holds raw sand bitumen near Fort McMurray, on July 9, 2008. . THE CANADIAN PRESS / Jeff McIntosh

The CEO of MEG Energy Corp. said a one-year delay in Enbridge Inc.’s Line 3 pipeline replacement project makes it highly unlikely it will approve an option to spend about $75 million to complete an expansion of its Christina Lake oilsands project in northern Alberta.

Derek Evans said about 60 per cent of the $275-million cost of the expansion has already been invested and it will take about a year to bring into production once approved, but there’s no point in doing so if there’s no pipeline capacity to carry the oil to market.

READ MORE: Oilsands producer MEG Energy posts $199M loss, vows to ship more oil by rail

Last week, Enbridge said permitting delays in Minnesota meant its Line 3 project, expected to add 370,000 barrels per day of export capacity of Canadian crude, won’t open until the second half of 2020, a year later than expected.

The MEG expansion would allow production capacity to climb to about 113,000 barrels per day from the current 100,000.

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READ MORE: Enbridge Line 3 replacement likely won’t be in service until second half of 2020

MEG shares fell by as much as 9.7 per cent to $4.75 in early trading on the Toronto Stock Exchange after it reported an operating loss of $118 million in the fourth quarter compared with an operating profit of $44 million in the same period of 2017.

It blamed the bigger loss on discounts on western Canadian crude as its average realized bitumen price fell to $13.90 per barrel from $48.30.

The company said it expects to double its crude-by-rail volumes from 14,700 barrels per day in the last three months of 2018 to 30,000 by next fall.