Alberta Wildfires Set to Veer from Oil Sands Operations, Spreading More Slowly

May 9, 2016 by and

Wildfires raging through Alberta are set to move away from the main oil-sands facilities north of Fort McMurray after knocking out an estimated 1 million barrels of production from Canada’s energy hub. A cold front scheduled to pass through the area may bring light rain that would help fire fighters battle the inferno.

The blaze, which had been forecast to expand to more than 2,500 square kilometers (965 square miles), grew slower than expected and now covers about 1,600 square kilometers, Alberta Premier Rachel Notley said at a news conference on Sunday. While the fire approached operations of Suncor Energy Inc., Canada’s biggest energy company, there was no damage as firefighters held the blaze southwest of the area.

Current weather conditions and forecasts show the fire moving east, away from the site, Suncor said. Cnooc Ltd.’s Nexen operations to the south of Fort McMurray have suffered “minor” damage, said Chad Morrison, a wildfire manager for the Alberta government.

The average temperature forecast for Sunday was 18 Celsius (64 Fahrenheit), with winds gusting up to 50 kilometers an hour (31 miles an hour) and the potential for showers in the Fort McMurray area, the Alberta government said.

While cooler temperatures present responders with a “great opportunity” over the next three to four days, fires deep into the forest will likely last for months, Morrison said. The blazes are being blown east and are 30 to 40 kilometers from the border with Saskatchewan, Morrison said. The fire that began a week ago probably had a human cause, though that remains unknown, he said.

“This beast is an extraordinarily difficult problem,” federal Public Safety Minister Ralph Goodale told reporters Sunday, in a reference to how the fire has been nicknamed. “Because of the weather in the last few hours and the weather forecast going forward, it would appear that the situation is moderating, perhaps a bit.”

Disruptions to oil production, the lifeblood of Alberta’s economy, add to a human catastrophe as blazes razed entire neighborhoods in Fort McMurray, the gateway to the world’s third-largest crude reserves. All of the 25,000 people who had gone north to flee the fire have been evacuated south and the majority of them are in Edmonton, Notley said.

The wildfires covering an area twice the size of New York city have led to production cuts of about 40 percent of the region’s output of 2.5 million barrels, based on IHS Energy estimates. The cuts, and the mass exodus of more than 80,000 people from Fort McMurray, are another blow to an economy already mired in recession from the oil price collapse.

Once the fires are under control, oil-sands-mining projects could be back to normal production levels in about a week, Morgan Stanley said in an e-mailed research note on Monday. In-situ projects, which use steam to extract the oil, could take two or more weeks depending on the start-up method and pressure requirements, it said.

Syncrude Canada, a joint venture controlled by Suncor, shut down its Aurora mine and Mildred Lake operation about 40 kilometers north of the city and has evacuated about 1,200 workers. Syncrude has a capacity for 350,000 barrels of oil a day. Morrison said the oil facilities are highly resistant to fire with their buffer zones.

Smoke reached Syncrude’s Mildred Lake site Saturday, company spokesman Leithan Slade said in an e-mailed statement. “We will bring operations back online only when it is safe to do so.”

Suncor, Phillips 66 and Statoil ASA have declared force majeure — a provision protecting companies from liability for contracts that go unfulfilled for reasons beyond their control — on supplies from the region. As the fires are set to move away from its oil-sands operations, Suncor said it has begun planning the restart of production after moving more than 10,000 employees, families and Fort McMurray residents out of the region. The restart will happen once it’s safe and when third-party pipelines are available, the Calgary-based producer said.

Husky Energy Inc., controlled by Hong Kong billionaire Li Ka-Shing, said Sunday it has completely shut its Sunrise facility, which has a capacity of 60,000 barrels a day and was producing about half that before the blaze began. Nexen’s operation, with a capacity of 92,000 barrels a day, was shut. Phone and e-mail messages left for Colleen Brown, a Nexen spokeswoman, seeking comment on damage to the facilities weren’t immediately returned.

The inferno around Fort McMurray may become the costliest catastrophe in the country’s history with insurance losses potentially reaching C$9.4 billion ($7.3 billion) if all homes in the city are lost. Bank of Montreal cut its second-quarter gross domestic product growth estimate to zero from 1.5 percent, citing “severe disruptions to oil production” due to the fires. BMO said the estimate was a placeholder, dependent on receiving more information on the scope of the disaster.

More than 1,500 firefighters, approximately 150 helicopters, 222 pieces of heavy equipment and more than 28 air tankers are fighting the fires across the province, the government said. About 250 employees from Atco Ltd., a Calgary-based utility and logistics company, are working to restore the power grid and assess the gas infrastructure.

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