Wildfires in Northern Alberta Continue to Disrupt Oil Sands Production

By and | May 27, 2015

Wildfires in northern Alberta kept about 10 percent of Canada’s oil sands production offline for a third day [on Tuesday] as Bank of America Corp. warned the blazes may slow the economy.

A fire at Cold Lake Weapons Range that started Saturday expanded westward to cover 10,000 hectares (25,000 acres), Alberta’s Environment and Sustainable Resource Development agency said on its website. Another fire broke out to the north near the town of Chard and was burning 1,000 hectares.

Blazes have prompted the shutdown of about 230,000 barrels a day of oil-sands output and will trim as much as 0.3 percent from Canada’s second-quarter economic growth if disruptions persist through May, Bank of America economist Emanuella Enenajor said in a report Tuesday.

“There is an economic fallout from the blaze,” she wrote. The effect on gross domestic product includes “the drag on oil- sands production as well as indirect impacts on support industries.”

Heavy Western Canadian Select crude’s discount to U.S. benchmark West Texas Intermediate narrowed 25 cents to $9.50 a barrel on Tuesday. The grade traded at an average discount of $8.71 a barrel to WTI this month, the longest period for a sub- $10 discount since 2010, data compiled by Bloomberg show. WCS’s absolute price fell $1.87 to $48.53 a barrel.

Maintenance Halt

MEG Energy Corp. halted maintenance at its Christina Lake site and evacuated staff, spokesman Brad Bellows said Tuesday. Production had been been ramping down since last week, although some continues, he said. Statoil ASA will evacuate non-essential staff from its Leismer site, which remains in operation, spokesman Knut Rostad said in an e-mail.

Canadian Natural Resources Ltd. said Monday it cut output at its 18,000-barrel-a-day Kirby South oil-sands operation after shutting in 80,000 barrels a day of production from its Primrose facility over the weekend. Cenovus Energy Inc. closed its 135,000-barrel-a-day Foster Creek operations on the Cold Lake Air Weapons Range in northeastern Alberta.

Energy companies with production offline because of the fires probably won’t suffer financially, said Chris Cox, an analyst at Raymond James Ltd. in Calgary. The fires aren’t expected to destroy any facilities or continue burning past this week and business interruption insurance will cover revenue losses, Cox said.

Other Fires

Uncontrolled fires were also burning in the western Fort McMurray area and farther west around Slave Lakes, the Alberta government website said. A province-wide ban was imposed on campfires in forests.

Canadian Natural evacuated personnel from its Primrose operations on Saturday. Also on Saturday, Cenovus evacuated 1,700 staff members from its Foster Creek site and shut 20 million cubic feet per day of gas production, most used to fuel its Foster Creek operation. The company pulled workers out of its Birch Mountain natural gas site northwest of Fort McKay late Monday and from its Narrows Lake oil-sands project on Tuesday as fires intensified.

The Narrows Lake oil-sands site isn’t producing and workers were finishing the camp project there when they were evacuated, Cenovus said in an e-mailed statement.

Canada, the world’s fifth-largest crude supplier, produces most of its oil from the oil-sands reserves of northern Alberta. The country will produce about 2.3 million barrels a day from the oil sands this year, according to the Canadian Association of Petroleum Producers.

–With assistance from Rebecca Penty in Calgary.

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