Americas News
Canada Wildfires Cause Over 1 Million BPD Loss of Oil Sands Production
Over 1 million barrels per day (bpd) is the estimated production loss of the Alberta oil sands, whose key players suspended operations over the weekend due to the encroaching wildfires that broke out on May 1.
Suncor Energy Inc.'s base mine to the north of Fort McMurray and CNOOC Nexen's Long Lake in situ operation south of the city closed when it seemed that the inferno would reach their operations; both facilities survived unscathed.
As a precaution, Syncrude Canada Ltd. also closed its mine and processing plant, which produces 350,000 bpd of light synthetic crude, even though there was no immediate danger to its facilities.
Husky Energy, whose output had already been cut from 30,000 to 10,000 bpd, shut production at its Sunrise joint venture with BP PLC, 60 kilometres northeast of Fort McMurray.
While evacuation due to wildfire is nothing new to the oil sands operators, this year's blaze, which as of Monday was 204,000 hectares in size, has destroyed 2,400 buildings, and created an "ocean of fire" around Fort McMurray, according to Alberta premier Rachel Notley.
It comes at a time when oil royalties paid to the province are expected to be only $1.4 billion this year compared to $9-billion in 2014-15.
On the bright side, Wood Buffalo Fire Chief Darby Allen said that had firefighters not been able to hold back the flames at key points, up to 50 percent of Fort McMurray could have been destroyed, but the region is now 85 percent intact.
However, it remains unclear how long the oil sands shutdowns will continue, and neither Allen nor Notley were willing to speculate.
The latter remarked, "Each of these operations and these companies are very sophisticated in terms of the work and capacity to keep themselves safe and ensure their work starts up again in a safe way.
"But we'll see if there is anything the province can offer to ensure the safe resumption of economic activity in the area."
Jackie Forrest, an energy economist with Arc Financial Corp., says, "They have a lot of fixed costs so they're going to be motivated to get some revenue to pay for those costs that aren't going away."
She added that production costs will likely rise as operators use service companies and suppliers beyond the Fort McMurray area until the city is resettled.
Meanwhile, news of Alberta's 1 million bpd loss caused a 2 percent market rally on Monday, but U.S. oil prices ultimately closed with a nearly 3 percent drop after another reported inventory build at the U.S. hub for crude futures.
Crude benchmarks got off to a strong start last week when the wildfires forced a reduction in output, but they turned on an EIA report that showed stockpiles had climbed more than double the expected amount.
