‘Ottawa’ Oilsands production Shutdown From Fort McMurray Wildfire Another Blow to Sector
A furious wildfire in Fort McMurray, Alta., the heart of Canada’s oilsands region, forced many producers Wednesday to curb output, dealing a further blow to a sector already devastated by low oil prices.
Suncor Energy Inc., Royal Dutch Shell PLC., Syncrude Canada Ltd., Husky Energy Inc., Connacher Oil and Gas Ltd., announced partial to complete production shutdowns to focus on housing evacuated employees and residents, and deploy resources to protecting the community.
Alberta Energy Minister Marg MacCuaig Boyd said that while oilsands mines and in-situ projects are located to the north and south of Fort McMurray, some oil and gas infrastructure is located in the impacted area and companies were taking steps to secure those operations.
“The people of Fort McMurray have done so much to improve the lives of all Albertans, and all Canadians,” she said. “We are doing everything we can to protect them and their community in this time of crisis.”
Shell shut down its Albian Sands mining operations, about 95 kilometres from Fort McMurray. The operation comprises Muskeg River and Jackpine oil sands mines that produce up to 255,000 barrels of oil a day.
“Right now, our priority is providing support for our people, their loved ones and others in the area,” a spokesman said. “Our work camp, the Albian Village, is now open to all evacuated Fort McMurray residents who need a safe place to stay and we are evacuating non-essential staff to make room for those who need it most.”
The company said it was flying employees and their families out of the area, to Calgary and Edmonton, and provided two teams to support firefighting efforts.
Suncor Energy Inc. said it was reducing output to allow workers and their families to get to safety.
Spokesman Paul Newmarch said it was too early to say how the fire would impact its production over the longer term as the immediate focus was on the safety of its employees and the Fort McMurray community. All non-essential employees were evacuated. Suncor said it was housing 2,000 evacuees at its work camps.
The Syncrude Canada Ltd. project also reduced production to minimize the use of its resources and support employees and their families.
“Most of Syncrude’s 5,000 employees are based in Fort McMurray and the region,” said spokesperson Cheryl Cobb. “That’s all we can think of right now. The impact on the production we don’t know.” Syncrude said it was housing 2,000 people.
Husky said it was reducing production at its Sunrise project to approximately 10,000 barrels a day, from about 27,000 bpd, because of the shutdown of a pipeline that supplies its diluent.
Connacher said it was curtailing production at its Great Divide project because it was impacted by the fire and by Fort McMurray’s mandatory evacuation.
Imperial Oil Ltd. and Canadian Natural Resources Ltd. did not take production offline, but both said they were providing support to evacuees and to fire-fighting efforts.
Imperial, majority owned by Exxon Mobil Corp., said staffing levels were reduced to essential staff only.
Oilsands production stood at 2.43 million bpd at the end of last year, accounting for roughly two-thirds of Canada’s total crude oil output, according to the Canadian Association of Petroleum Producers.
Tim Pickering, president of Auspice Capital Advisors Ltd., a commodities and alternative investment trading firm based in Calgary, said the fire was lifting Canadian oil prices on uncertainty about how much oilsands production could be lost.
“We have a lot of Canadian crude in storage to back up” production shortages over the short term, he said. “We don’t have facilities at risk at this point, what we have is a manpower issue that is arguably temporary and we have to wait and see what that means longer term.”
Still, Pickering said the fire “should strike fear in the United States” because it highlights its reliance on supplies from the Canadian oilsands.
Oil closed at US$43.70, or 0.3 per cent higher, on Wednesday pressured by expectations U.S. crude inventories will rise further from a record high, although reduced production in Canada’s oilsands region lent support.
Western Canadian Select crude’s discount to West Texas Intermediate futures edged higher to 80 cents to $12.65 a barrel, the narrowest in two months.