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Conoco's Surmont shift to weigh on Canadian synthetic crude - Bloomberg

|About: ConocoPhillips (COP)|By:, SA News Editor

ConocoPhillips' (NYSE:COP) shift to a cheaper substitute to dilute the thick bitumen coming from its oil sands operations may hurt companies that turn heavy oil into more-valuable lighter grades, Bloomberg reports.

COP currently uses synthetic crude produced in local upgraders to thin out the bitumen extracted from wells at its 150K bbl/day Surmont site, but by end of Q4, Surmont will be able to switch to using condensate as a diluent instead, according to documents submitted to the Alberta Energy Regulator.

A Surmont switch to 100% condensate would amount to more than 10% of the total volume of synthetic crude produced in Canada, according to Canadian Energy Regulator data, a loss of demand that may depress prices of synthetic crude.

The result likely would hurt companies such as Suncor Energy (NYSE:SU) and Canadian Natural Resources (NYSE:CNQ) that process bitumen in upgraders to make the lighter grades.

Synthetic crude prices have weakened ahead of the changes; after trading at a premium to WTI futures since June, the grade flipped to discount last week and is now trading at US$1.25/bbl below WTI, Bloomberg reports.

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