Fort McMurray fires shut down even more oilsands facilities, knock one million barrels offline
Claudia Cattaneo and Geoffrey Morgan, Financial Post, May 5, 2016
CALGARY — More oilsands companies have been forced to reduce or shut down production as the raging wildfire that started near Fort McMurray spreads south to new producing areas.
Meanwhile, oil companies poured their resources into the firefighting effort — from sheltering evacuees to helping with medical emergencies.
Suncor Energy Inc., Imperial Oil Ltd. and Athabasca Oil Corp. all announced production reductions or shut-downs late in the day Thursday in response to the growing fire, which is now estimated to have pushed more than 1 million barrels — close to 40 per cent — of oilsands production offline.
Suncor Energy, Canada’s largest integrated oil company, issued a release that said pipeline shut-ins had forced the company to shutdown its MacKay River, Firebag and Base Plant production, knocking another 300,000 barrels of oil per day offline.
Athabasca Oil closed and evacuated its 12,000-bpd Hangingstone oilsands project south of the city of Fort McMurray, which continued to burn throughout Thursday night.
Imperial Oil, one of the mining projects furthest north from Fort McMurray had also reduced its production at the Kearl oilsands project, but did not provide updated production numbers.
“Based on press releases and our discussions with producers, the fires have impacted oilsands production by an estimated 0.9 to 1 million b/d — disproportionately weighted towards synthetic crude oil,” Greg Pardy, co-head of global energy research at RBC Dominion Securities Inc., said in a report. “This would constitute about 35 per cent to 38 per cent of our 2016 oilsands outlook of 2.6 million b/d.”
Steve Laut, president of Canadian Natural Resources Ltd., said it was difficult to gauge the long-term impacts of the crisis because it was still evolving.
“It’s devastating to the city of Fort McMurray,” he said Thursday after addressing the company’s annual meeting.
Many production facilities are located away from the fire, but “it’s really the workers at the mines and the plants who live in Fort McMurray who are impacted,” Laut said.
Canadian Natural said its operations at the Horizon mining project were stable. As part of its contributions to the relief effort, the company made an aircraft available to assist with medical emergencies, including delivering a baby.
Oil consulting firm Wood Mackenzie said deep production cuts could impact refineries in the United States.
“Production cuts are expected to be short-lived. However, if they are not, the effects of the Fort McMurray fires could spread beyond Canada’s borders,” the firm said in a report.
PIRA Energy Group also estimated one million barrels a day has been shut down.
“Power supply to the region remains an area of concern going forward,” the U.S. research firm said. “The lack of adequate and stable power supply would extend production losses and hinder the reliability of operations.”
ConocoPhillips Canada said Thursday it had shut down and evacuated its Surmont oilsands project south of Anzac, a community south of Fort McMurray. Evacuees fleeing Surmont were heading south to Edmonton, ConocoPhillips said.
Nexen Energy ULC evacuated and shut down its Long Lake facility near Anzac.
People taking shelter in Anzac had also fled south, many to Conklin, which is near other projects operated by companies including Cenovus Energy Inc., MEG Energy Corp., Devon Energy Corp., Harvest Operations Corp.
“As the weather conditions can change rapidly, we have shut down all operating equipment in preparation for a possible evacuation as the safety of our people is paramount,” said Harvest spokesman Greg Foofat said, noting his company’s project is not currently producing.
Oilsands mining projects were the first to reduce or shut down production altogether.
Royal Dutch Shell PLC has closed its Muskeg River and Jackpine mines, north of Fort McMurray, which have a combined capacity of 255,000 barrels a day. Spokesperson Cameron Yost said it was too early to assess how long the shut down would continue. “Right now, our focus is on keeping our people, their love ones and other evacuees safe,” he said.
Suncor Energy Inc. said it shut down production at its base plant, which usually produces 350,000 b/d, although volumes were already lower as one of its upgraders was down for turnaround work. Production at its in-situ operations was running at reduced rates.
The Syncrude Canada Ltd. plant, which is majority owned by Suncor, was operating at reduced levels.
“It’s too soon to tell how long it may take to return to normal production levels,” said Suncor spokesman Paul Newmarch. “Our facilities are still removed from the fire and not physically threatened. At this point in time we’re unsure how many of our employees have been directly impacted and we are still assessing the situation.”
Tim Pickering, president of Auspice Capital Advisors Ltd., a commodities and alternative investment trading firm based in Calgary, said oil prices were rising on uncertainty about the fire’s immediate and longer term impacts.
There is enough oil in storage in the province to make up for up to two months of production losses, he said. “The question is what is duration of the disruption,” he said. “It’s going to be a wake up call for a lot of folks.”
In the past, the effects of sudden shutdowns has significant impacts on the economy, said BMO senior economist Robert Kavcic.
Kavcic noted the real gross domestic product in Canada’s energy sector fell 4.2 per cent in May 2011 after an Alberta wildfire roared through the community of Slave Lake.
“That was big enough to pull Canadian growth down into negative territory temporarily, at least, for one month,” he said.