Alberta wildfires threaten 400,000 b/d of oil production

The continuing wildfires in Alberta has the potential to impact some 400,000 b/d of crude oil production primarily in the province's northeast, with multiple producers being on high alert as 176 fires are currently burning in the province, industry participants said July 26.

The Western Canadian province of Alberta is home to some 4 million b/d of heavy and light oil and nearly 16.8 Bcf/d of natural gas production.

Major producers have put staff on high alert and implemented emergency response measures, ATB Financial said in a report, adding so far the actual impact on production appears minimal, but risks are elevated.

The situation on the ground is evolving and nearly 400,000 b/d are presently at risk based on proximity to major wildfires, it said.

"The worst of the wildfire season is likely still ahead of us as temperatures continue to rise and a third of Alberta wildfires are burning out of control, threatening 400,000 b/d of production," Goldman Sachs said in a report July 25.

Suncor has been curtailing production in its over 200,000 b/d Firebag field for over two weeks and other producers started to evacuate non-essential workers from the most affected fields while keeping production stable so far, according to Goldman Sachs.

No comments were immediately available from Suncor, but some conventional and oil sands producers like MEG Energy have started to "send back" non-essential staff to its production site in northern Alberta, while a fellow producer Baytex Energy remains on "high alert," their CEOs said on second quarter earnings webcasts.

"Last week, we proactively evacuated non-essential staff," MEG CEO Darlene Gates said. "Today [July 26] we started sending them back to our Christina Lake site where output remains steady."

The oil sands facility produced just over 100,000 b/d in the last quarter, MEG reported in its earnings release.

"We have installed facilities for mitigation at Christina Lake and will never say we are out of the woods. We will see wildfires and they will be here for a while," she said, adding producer's have to monitor droughts in summer as "that's the world we are in today."

Baytex is not impacted by the wildfire, yet it remains on high alert and is on standby to "lend a helping hand to its peers," CEO Eric Greager said on the earnings webcast July 26.

"We are better off this year than last year and the fire is not in close proximity to our operations in norther Alberta," he said.

Last summer, Baytex had to curtail 10,000 b/d of heavy oil sales volumes due to the wildfire that resulted in producers shutting in at its peak 357,000 b/d of oil equivalent output, of which 70,000 b/d was conventional crude oil, 96,000 b/d was NGL and 1.1 Bcf/d was natural gas, S&P Global Commodity Insights estimated then.

Fire impacts Jasper National Park

At present there are 176 wildfire burning in Alberta of which 54 are out of control, 49 are being held and 73 are under control, the Alberta government said in its latest update.

The fire is 68 km (43 miles) northeast of Fort McMurray – the prime area for oil sands production, Alberta government spokesperson Emily Smith said in an email, pointing out the danger level is "extreme."

However, fire has reached the town of Jasper and the national park through which passes the expanded 890,000 b/d Trans Mountain crude oil pipeline and also Canadian National Railroad tracks that ship crude and LPG from Alberta to the Canadian West Coast in tankers.

"At this time there is no indication of damage to infrastructure and the pipeline continues to operate safely," Trans Mountain Corp. said in a statement."

CN Rail has started restarted its operations July 26 to the Canadian West Coast after an inspection of the route and infrastructure, the railroad said.

Natural gas output to decrease

Natural gas output in the province is being forecast to decline 700 MMcf/d by July end due to the "excessive" heat and hot weather conditions, Commodity Insights gas analyst Ian Archer said July 26.

"The wildfire has had no impact so far," Archer said. "But we are forecasting a month-on-month decline in July to 16.8 Bcf/d of production compared with June due to pumps losing efficiency."