A wall of fire rages outside of Fort McMurray, Alta. Tuesday May 3, 2016.

A wall of fire rages outside of Fort McMurray, Alta. Tuesday May 3, 2016.
Photo Credit: PC / Terry Reith

Fort McMurray fire shuts down fifth of Canada’s oilsands production

The shut down of oilsands facilities in the western Canadian province of Alberta accelerated Thursday, as the wildfire raging through Canada’s oil production heartland grew to over 85,000 hectares.

Economists estimate the shut downs by several oil companies have taken offline about one million barrels a day, or about 18 per cent of oilsands production.

Authorities have expanded an evacuation order around the municipality of Fort McMurray as raging wildfires that devastated several neighbourhoods in the municipality and surrounding areas continued to burn for a third day despite cooler weather.

Alberta Premier Rachel Notley was forced to declare a state of emergency Wednesday, as at least 1,600 structures burned and more than 88,000 residents were forced to flee their homes ahead of the fast-moving and unpredictable flames.

 Wildfires burn in and around Fort McMurray, Alberta, Wednesday, May 4, 2016. The raging wildfire emptied Canada’s main oil sands city, destroying entire neighborhoods of Fort McMurray, where officials warned Wednesday that all efforts to suppress the fire have failed.
Wildfires burn in and around Fort McMurray, Alberta, Wednesday, May 4, 2016. The raging wildfire emptied Canada’s main oil sands city, destroying entire neighborhoods of Fort McMurray, where officials warned Wednesday that all efforts to suppress the fire have failed. © Jeff McIntosh

With no relief in sight and the fire expanding rapidly, authorities ordered late Wednesday night mandatory evacuation of communities south of Fort McMurray, including Anzac, Gregoire Lake Estates and Fort McMurray First Nation.

ConocoPhillips Canada said Thursday it had shut down and evacuated its Surmont oilsands project south of Anzac. Nexen Energy ULC also said it evacuated and shut down its Long Lake facility.

Shell has shut down its Albian Sands facility, about 100 kilometres from the fire.

“While our operations are currently far from the fires, we have shut down production at our Shell Albian Sands mining operations so we can focus on getting families out of the region,” Shell spokesman Cameron Yost said.

Suncor Energy Inc. said it shut down production at its base plant.

“We are reducing production at our regional facilities in order to allow employees and their families to get to safety,” the company said in a statement.

“We’re providing transportation and accommodation to the region to support the evacuation,” spokesman Paul Newmarch said. “We’re making whatever we have available to support the evacuation.”

The Syncrude Canada Ltd. plant, which is majority owned by Suncor, is also operating at reduced levels.

 The processing facility at the Suncor tar sands operations near Fort McMurray, Alberta, September 17, 2014.
The processing facility at the Suncor tar sands operations near Fort McMurray, Alberta, September 17, 2014. © Todd Korol / Reuters

Allan Fogwill, President & CEO of Canadian Energy Research Institute, said unless the wildfires spread to the oilsands production infrastructure, he expects the industry to rebound quickly.

“Given that the infrastructure is not under threat, it may be a very short-term impact on production over few days and weeks to get over the immediate crisis,” Fogwill said. “That would, of course, change if the fire was to get to the infrastructure itself and do damage.”

(click to listen to the interview with Allan Fogwill)

It’s unclear how the oil companies are going to be able to deal with manpower issues since so many of their employees are affected by the disaster, Fogwill said.

“But generally speaking these companies have large workforces that come in and out of the region,” Fogwill said. “So the idea of moving the employees around to get them to places of work is not new for the industry.”

There is also a lot of speculation how the fire will affect the world oil markets in the medium and long term, he said.

“While it’s a short-term humanitarian disaster, it’s not necessarily a medium to long-term problem for the international oil market,” Fogwill said. “We’re talking about a small portion of the overall global output of oil to the market on the daily basis when we are already in surplus and we have a huge amount of inventory waiting to utilized.”

Nevertheless, concerns over the wildfire and escalating tensions in Libya, drove crude prices up for the first time in a week on Thursday.

Brent futures were up 78 cents US, or 2.2 per cent, at US$45.40 a barrel by 12:49 p.m. EDT (1649 GMT), Reuters reported.

U.S. crude’s West Texas Intermediate (WTI) futures gained US$1.04, or 2.4 per cent, to US$44.81.

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