Business

Wildfire could cut oilsands production in half

Several oilsands companies are shutting down their operations as the wildfire around Fort McMurray draws closer to some facilities, reduces pipeline access and wreaks havoc on workers.

Reductions could amount to 1.4M barrels per day

A wildfire moves toward the town of Anzac from Fort McMurray, Alta., on May 4. (Jason Franson/Canadian Press)

Several oilsands companies are shutting down their operations as the wildfire around Fort McMurray draws closer to some facilities, reduces pipeline access and wreaks havoc on workers.

Oilsands production has fallen by about one million barrels per day and could drop further. 

There is for sure a tremendous amount of uncertainty.- Samir Kayande, ITG Investment Research

About 1.4 million barrels per day (bbl/d) is produced in the area close to the fire, according to Samir Kayande, with ITG Investment Research in Calgary, which represents more than half of all oilsands production. 

Several pipelines are not operating as a precaution.

"Without pipes running, it seems reasonable that a large proportion of that or all of that is subject to being shut-in over the next few days," he said. 

Athabasca Oil's Hangingstone operation is just five kilometres away from the fire. Given the safety risk to the 70 workers on site and the potential risk to the facility, the company decided to evacuate and shut down the plant.

"There was no damage when we evacuated it and we'll continue to assess the situation," said spokesman Matthew Taylor. 
Current oil production is estimated at more than 2.3 million barrels per day.

Massive disruptions

Suncor Energy has shut down all of its operated oilsands facilities in the region, taking upward of 600,000 bbl/d of production capacity offline.

The company cited several reasons, including a lack of diluent, which is used to help the movement of bitumen in pipelines. 

Suncor is using four of its planes and four aircraft from WestJet to help with evacuation efforts in the region.

"I'm pleased we're able to continue assisting with the safe movement of thousands of people out of the region," said Suncor CEO Steve Williams in a statement.

Other oilsands production cuts:

  • Shell Albian Sands (about 255,000 bbl/d).
  • Nexen Long Lake (about 40,000 bbl/d).
  • ConocoPhillips Surmont (about 50,000 bbl/d). 
  • Imperial Oil Kearl (unknown).
  • Syncrude (unknown).

Considering the unpredictability of the wildfire, it's not clear how long companies will have to curtail production. Certain producers with SAGD facilities (steam-assisted gravity drainage) must keep the bitumen underground heated, or else they risk losing production in the long run.

"There is for sure a tremendous amount of uncertainty," said Kayande. "If the wind shifts and the fire burns itself out, and assets are not endangered, then you can get up and running relatively quickly. For the SAGD operations, the sooner the better. You don't want to lose the heat that's been put in the reservoirs."

Oilsands companies are acting on their emergency response plans. Many of the facilities have emergency crews on site and have runways to help with evacuations.

Canadian Natural Resources' Horizon oilsands site, for instance, has an emergency response team that offers fire prevention, fire protection, medical and rescue response, industrial firefighting and aircraft rescue services. Two of the company's firefighting crews are assisting the provincial government's efforts in battling the wildfire.

Economists estimate the massive disruptions in oilsands production will affect the Canadian economy.

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