ALBERTA ABSORBS 1-2 PUNCH
Oil collapse, wildfires heavy burdens
CALGARY The raging wildfire burning through vast areas in and around Fort McMurray has forced more nearby oilsands companies to shut down their operations and forced staff and output reductions at more far-flung facilities in northern Alberta.
On Friday, as air evacuations continued for 25,000 people north of Fort McMurray, Syncrude Canada Ltd. became the latest company to announce it had closed an oilsands operation, its Aurora mine, and was reducing production and activities at its remaining operations to minimum levels.
In a statement, Syncrude Canada CEO Mark Ward did not say what the effect would be on the company’s daily production, which was at about 315,000 barrels in the first quarter.
Analyst estimates on Thursday put the total amount of oil shut in from the fires at one million bpd, or roughly 40 per cent of total oilsands production. But the amount of production affected is now expected to exceed those numbers as the fire grew significantly into Friday and as additional companies have reduced production.
“When we’re talking about a potential shutdown of up to a million barrels per day, that’s very serious business for the global oil market if it persists,” BMO Capital Markets chief economist Douglas Porter said Friday.
With the Aurora shut down, Syncrude joined Suncor Energy Inc., Shell Canada Ltd., Conoco Phillips Canada, Nexen Energy ULC and Athabasca Oil Corp. in shutting down production at specific facilities in response to the fire.
Suncor announced late Thursday that the 300,000 bpd it had been producing at its base plant, Firebag and MacKay River facilities was off-line as of that afternoon due to the fire.
In an update Friday, Alberta Wildfire Prevention and Enforcement senior manager Chad Morrison said the fire was “at the gates” of Nexen’s Long Lake project, which had already been evacuated.
There has, so far, been no major damage reported to any major oilsands facilities despite the proximity of the fire, but Morrison said he expected crews to be working for “weeks and weeks” as the inferno continued. It grew from an area covering 850 square kilometres on Thursday to 1,010 square kilometres on Friday.
Even oilsands operations farther out from Fort McMurray’s city centre have been affected by the blaze. Shell’s mines are 95 kilometres north of the city and have been shut down in response to the burn.
Imperial Oil Ltd., whose Kearl mine is further north than Shell’s operations, announced it had also reduced its workforce to essential staff and reduced production at Kearl. It did not say how much oil the project had been producing.
To the south, pipeline shutdowns had also affected operations as far away as Conklin, where a Statoil ASA spokesperson said Thursday the company had reduced production from its project by half and was assisting with the firefighting effort.
A handful of companies, including Canadian Natural Resources Ltd., have kept up their output levels. CNRL issued a statement Friday that said “current operations remain stable” and that the company’s in-house firefighters were continuing to fight the fire.
Other companies have committed their fire crews to the fight as well.
In addition to the toll on the 88,000 Fort McMurray residents displaced by the blaze, and the insurers that have underwritten the 1,600 structures burned, the fire is expected to impact the entire country’s economic performance
When we’re talking about a potential shutdown of up to a million barrels per day, that’s very serious business for the global oil market if it persists.
in large part as a result of the oilsands production shut downs.
In a report Friday, RBC Economics Research said the fire could subtract 0.5 per cent of Canada’s total gross domestic product for May, assuming the oilsands project shutdowns last for two weeks.
“A shutdown of this duration would be keeping with, although significantly larger than, wildfire related shutdowns of oilsands operations in late May and early June of last year,” economists for the bank wrote.