Alberta Wildfires Approach Suncor Oil Site as Blaze Spreads – Bloomberg

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Wildfires ravaging the center of Canada’s oil patch in northern Alberta may double in size as warm temperatures and swirling winds push the inferno close to several major oil-sands operations, forcing a shutdown at one of the province’s biggest producers.

The blaze, which expanded by half to 1,500 square kilometers (580 square miles) overnight, made an “unexpected” move to the north of Fort McMurray, rapidly approaching bitumen mining operations run by Suncor Energy Inc. and others, Travis Fairweather, a forestry spokesman, said in phone interview.

“It is a dangerous and unpredictable and vicious fire that is feeding off an extremely dry Boreal forest,” federal Public Safety Minister Ralph Goodale told reporters Saturday in Regina, Saskatchewan. He said the swirling fire is not a threat to any additional communities.

Syncrude Canada Ltd., 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. The fires are also closing in on Suncor’s main oil-sands base near Syncrude, said Chad Morrison, a wildfire manager for the Alberta government. Morrison said the oil facilities are highly resistant to fire with their buffer zones.

“While there is no immediate threat from fire, smoke did reach our Mildred Lake site this morning,” said Syncrude spokesman Leithan Slade, in an e-mailed statement. “We will bring operations back online only when it is safe to do so.”

Oil Sands and the Environment: Quick Take

There is “high potential” that the fire could double from Friday to 2,000 square kilometers, Morrison said. That’s more than twice the area of New York City. Convoys of about 30 trucks will begin moving through Fort McMurray north carrying equipment to support “critical industrial services,” the government of Alberta said in a statement. At the same time, convoys of evacuee vehicles are moving south after as many as 2,400 vehicles transited through the city yesterday transporting families to Edmonton and other cities.

Production Cuts 

The blaze has prompted the shutdown of as much as 40 percent of the region’s oil-sands production, according to Royal Bank of Canada estimates. Syncrude said on its website Saturday that it’s shutting Mildred Lake after smoke reached the site. Its Aurora site 35 kilometers to the north is also closed. All units would be brought down by this weekend. 

Calgary-based Suncor, Canada’s biggest energy company, Phillips 66 and Statoil ASA have declared force majeure on supplies from the region. Husky Energy Inc. said Saturday it was shutting down its Sunrise facility, which has a capacity for 60,000 barrels a day and was producing about half that.

The fire reached Cnooc Ltd.’s Nexen operation to the south of the city yesterday, forcing a shutdown of that facility. Officials haven’t been able to assess if there was damage, due to the clouds of smoke. The facility is “probably OK,” Morrison told reporters Saturday in Edmonton.

Smoke rises over Fort McMurray on May 6.

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. Police and military officials are working to evacuate the remaining 10,000 residents who had gone north to work camps now considered unsafe, escorting them in convoys of 50 vehicles at a time through the smoke and ash. Alberta Premier Rachel Notley said most of the families who fled to the north camps will be relocated by the end of Saturday.

Evacuees leave Fort McMurray on May 6.

Sam Osterhagen, a welder who was working near the oil hub, spent the bulk of his 40th birthday in the convoy after lining up early in the morning. He and his coworkers were stuck for the last three nights at a campsite, watching as the fires burned. It looked like an orange ball glowing in the distance, with flames a couple hundred feet high, they said.

“I didn’t think I was going to make it,” Osterhagen said, after stopping with his buddies to grab a burger at Wally’s Fast Food in Grasslands on Highway 55, about halfway from Fort McMurray to Edmonton. It had taken them seven hours to drive a distance that would normally take two.

Passing through Fort McMurray, the men could see vast swaths of burned-out forest and homes and buildings destroyed, though the downtown seemed to be intact, they said. The smoke was thick in the air and embers glowed in the burned brush along the roadside until they got well south of town, they said.

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). 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.

The economic cost of the disaster is “unquantifiable,” Goodale said, but it will be “far-reaching and deep.”

Alberta has already set aside C$100 million to help families affected by the blaze, Notley said. Fort McMurray, which was once a bustling hub of activity for oil and gas workers, now sits empty and will not be safe for a long time, she said.

Rain Coming

Environment Canada said temperatures would rise to 27 degrees Celsius (80 degrees Fahrenheit) on Saturday, about 10 degrees warmer than normal. There is a 30 percent chance of rain on Sunday, followed by cooler temperatures next week. Goodale said only a rain downpour will be able to stop the fires, which are also burning in neighboring provinces of British Columbia and Saskatchewan.

Oil Crash

The wildfire is the latest blow to a province already grappling with the economic toll of a two-year oil price slump in one of the world’s most expensive places to extract crude. More than 40,000 energy jobs have been lost in Canada since the price crash began in 2014, pushing the provincial economy into recession.

Royal Bank of Canada estimated that as much as 1 million barrels a day of production was shut because of the blaze as companies including Suncor, Nexen, Royal Dutch Shell Plc, and ConocoPhillips reduce production. Inter Pipeline Ltd. shut part of its system in the province. The disruptions pushed up the price of oil sands crude.

Force Majeure

Suncor said it issued various notifications of force majeure — a provision protecting companies from liability for contracts that go unfulfilled for reasons beyond their control — to customers, service providers and other third-party contracts that will be affected by reduced or stopped operations in the region. Phillips 66 declared force majeure after cutting production in response to the fires, a person familiar with the matter said, asking not to be named because the information isn’t public. Statoil said it declared force majeure on production after curtailing supplies from its Leismer facility. Cenovus Energy Inc. said it was evacuating non-essential staff.

Nexen, a unit of China-based Cnooc, said in a note posted on its website late Friday that its Long Lake facility is shut and has been evacuated. Long Lake has production capacity of 92,000 barrels a day. “At this time we do not know the status of our facility,” the company said.

Major oil-sands sites are near Fort McMurray and are concentrated to the north. Most of Alberta’s oil and gas facilities have their own fire-fighting crews and have physical defenses against wildfires, such as gravel fields and fire breaks, Morrison said.

There were a total of 40 fires Saturday, down from 49 Thursday, with seven considered “out of control,” according to government estimates. More than 1,400 firefighters, approximately 130 helicopters, and 27 air tankers are fighting the fires.

Alberta Wildfires Approach Suncor Oil Site as Blaze Spreads – Bloomberg