Canadian Natural Resources applies to resume Primrose crude extraction

Canadian Natural Resources Ltd. is seeking approval to resume crude extraction from the part of its Primrose Eastoilsands property where a bitumen-water mixture was found oozing to thesurface last year.

But the Calgary-based company (TSX:CNQ) said it's planning to usea different steaming method that it says wouldavoid the problemsthat may have led to the high-profile leaks in eastern Alberta,which are still being investigatedby the province's energywatchdog.

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Canadian Natural filed an application to the Alberta EnergyRegulator last week asking for permission to inject steam atlow pressure in a technique known as steam flooding.

Previously, Canadian Natural had injected steam at high-pressureusing a technology known as cyclic steamstimulation, the safety ofwhich has been questioned by environmental groups. With that methodoften described as "huff and puff" a well alternates between injecting steam and drawing the softened bitumen to thesurface.

On a conference call with analysts Thursday, Canadian Naturalpresident Steve Laut says it's "not possible" for steamfloodingto create the same conditions that led to the Primrose East leaks.

Cyclic steam would enable production to ramp up more quickly, but rates over the long term are expected to be thesame if steam flooding is used instead, said Laut.

"I wouldn't see much of a drop in overall yearly averageproduction from a steam flood at this stage versus a cyclicprogramat this stage," he said.

Primrose leak site "unique" area, says CNRL

The AER has said it won't allow steaming to resume until it'sconvinced all the risks have been addressed.

Last month, the energy watchdog said it had a better idea of whatwent wrong at Primrose. It said the main issuescentre aroundCanadian Natural's steaming strategy and on old wellbores around thesite that have providedpaths for fluids to flow to the surface.

Once a final report has been completed, Canadian Natural said itwill apply to use cyclic steam on other parts of thePrimrose Eastproperty. The section of Primrose East where the leaks took place,and where the company wants touse steam flooding, is a "uniquearea geologically," said Laut.

Some 1.2 million litres of the bitumen-water emulsion have beenrecovered and 20.7 hectares have been affected.

Thecompany said onThursday that clean-up is complete.

Turn down application, Greenpeace urges

Greenpeace campaigner Mike Hudema said the fact that CNRL wantsto restart steaming before the investigation iscomplete "showswhat little regard the company has for the environment."

"Not only should the Alberta Energy Regulator quickly turn downthis application, it should force CNRL to stop alloperations in thetroubled region and begin the independent in-situ safety inquirythat dozens of First Nations,landowner and environmental groupshave called for."

Production from Canadian Natural's steam-driven oil operations isexpected to come in lower than previously anticipated,with thebottom end of the range lowered to 112,000 barrels per day from120,000.

Some of that is due to the fact that it's taking longer thanexpected to start steam flooding at Primrose East. As well,mechanical issues at Canadian Natural's Kirby South steam plant arecausing production to ramp up more slowlythan planned.

Earlier Thursday, Canadian Natural said it more than doubled itssecond-quarter net earnings, helped by increased salesand higherprices.

The Calgary-based oil and natural gas producer reported profits of $1.07 billion, or 97 cents per share, versus $476million, or 44cents per share a year ago.

Adjusted profits were $1.04 per share, which beat analystexpectations by six cents a share, according to ThomsonReuters.

Company-wide production for the three months ended June 30 grew31 per cent to 817,471 barrels of oil equivalent perday.

Realized prices for its crude oil averaged $87.03 per barrel, upnearly 16 per cent from the same period a year earlier.

Product sales rose to almost $6.11 billion from $4.23 billion.

Shares of the company closed down nearly 2.3 per cent at $44.82on the Toronto Stock Exchange.