Canadian Regulators Shut Down Murphy Oil Wells In Alberta Province

Regulators in the Canadian province of Alberta have shut down 33 heavy oil well sites operated by a subsidiary of Murphy Oil Corp. that was found to be noncompliant with requirements to capture and conserve gases in the Peace River area.

According to a news release issued on Friday, July 3, by the Alberta Energy Regulator (AER), inspection teams conducted a compliance sweep of 71 sites from June 15-19 in the Peace River area and shut in sites not meeting the requirements. Peace River, Alberta, is a small scenic community located in northwestern Alberta about five hours north of Edmonton.

The AER found 16 sites, all operated by Murphy Oil Company Ltd., to be noncompliant with requirements to capture and flare, incinerate, or conserve all casing gas and tank-top gases in accordance with their schedule, submitted to and approved by the AER. As a result, they were shut in or partially shut in. A partial shut-in involves shutting in the piece of equipment that is in noncompliant without shutting down the entire site.

The AER directed Murphy to conduct inspections on remaining sites. The company shut in or partially shut in an additional 17 sites that were venting casing or tank-top gas.

“Albertans expect the AER to protect public safety and the environment and to make sure operators follow the rules,” said AER president and CEO Jim Ellis. “The AER is committed to continued action in Peace River and ensuring all our requirements are met. When they are not, we will take enforcement action as we have demonstrated with these recent compliance sweeps.”

Currently, the AER is conducting an investigation into the noncompliance issues related to Murphy’s Peace River operations, officials said. All sites will remain shut in or partially shut in until Canadian energy regulators approve the Arkansas oil company’s action plan to achieve compliance.

According to AER officials, Murphy Oil and other energy operators in the Seal Lake and Walrus areas submitted operating plans to the AER in June 2014 that included an implementation schedule to capture tank-top gases as part of an ongoing effort to improve air quality in the Peace River area. As a part of those plans, the AER has established a panel of hearing commissioners to conduct a proceeding into odors and emissions associated with heavy oil operations in the Peace River area.

The AER has conducted six sets of targeted compliance sweeps since June 2014, inspecting 834 sites in the Peace River area. These sweeps supplement the AER’s regular inspections.

In the first quarter, Murphy’s Canadian operations reported losses of $38.5 million in the first quarter 2015 compared to earnings of $67.6 million in the 2014 quarter, mainly due to across the board declines in its conventional oil and natural gas operations and synthetic oil operations.

According to the El Dorado oil giant’s quarterly securities filing, results for conventional operations were $75.6 million lower in 2015 mostly due to lower realized sales prices for crude oil and natural gas and less oil sales volumes compared to the 2014 period and the estimated costs of remediating a leak or leaks in the Seal heavy oil project, which is located in northern Alberta.

In March, Murphy’s Canadian subsidiary reported that its spilled 17,000 barrels of petroleum product at its Seal heavy oil site, which is located about 50 miles southwest of Peace River. According to Murphy and AER officials, the pipeline spill was in a remote area and no rivers or wildlife was affected.

According to a Murphy presentation on its Canadian operations, the U.S. oil and gas company has been operating in the Peace River area since 2003, and booked total net production of nearly 54,000 barrels of oil equivalent per day (bbepd) in 2014. The company also recently filed an application to build a 12,450 barrel per day thermal oil project, an enhanced recovery method for heavy and high viscosity crude oils.