Alberta Fires Spreading Into Oil Sands Area Cut Output

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Wildfires in northern Alberta have spread farther into the oil sands area, keeping about 10 percent of production offline.

A fire at Cold Lake Air Weapons Range that started Saturday expanded to cover 17,500 hectares (43,000 acres) as fire crews worked to prevent the blaze from reaching the Foster Creek area, Alberta’s Environment and Sustainable Resource Development agency said on its website. Another fire near the town of Chard grew to 1,400 hectares and burned in an area with “numerous pipelines and well sites.”

Blazes have prompted the shutdown of about 230,000 barrels a day of oil-sands output. Heavy Western Canadian Select crude’s discount to U.S. benchmark West Texas Intermediate narrowed Wednesday for a second day, shrinking 50 cents to $9 a barrel at 9:56 a.m. Mountain time, data compiled by Bloomberg show.

Non-conventional oil production represents about 2 percent of Canada’s economy and “the current outages could shave a tick or so from May’s GDP outlook, and perhaps more from June’s if the fires persist,” Nick Exarhos, an economist at CIBC World Markets in Toronto, said in a note Wednesday.

The disruptions came as heavy Canadian crude prices have been at their strongest levels relative to WTI in five years. The grade has traded $10 a barrel below the benchmark every day this month, the longest period for such a discount since 2010, data compiled by Bloomberg show. WCS’s absolute price rose 83 cents to $49.04 a barrel.

Evacuated Workers

Cenovus Energy Inc. said Tuesday it evacuated workers from its Narrows Lake oil-sands project and Birch Mountain natural gas plant because of the fires. The Narrows Lake oil-sands site isn’t producing and workers were finishing the camp project there when they were evacuated, Cenovus said in an e-mailed statement.

The company decided Saturday to close its 135,000-barrel-a-day Foster Creek operations, its largest project, and evacuate 1,700 staff members. Cenovus shut 20 million cubic feet per day of gas production, most used to fuel its Foster Creek operation.

Canadian Natural Resources Ltd. said Monday it cut output at its 18,000-barrel-a-day Kirby South oil-sands operation after shutting in 80,000 barrels a day of production from its Primrose facility over the weekend.

MEG Energy Corp. halted maintenance at its Christina Lake site and evacuated staff, spokesman Brad Bellows said Tuesday. Production had been been ramping down since last week, although some continues, he said. Statoil ASA will evacuate non-essential staff from its Leismer site, which remains in operation, spokesman Knut Rostad said in an e-mail Tuesday.

Uncontrolled fires were also burning farther west in the Slave Lake area, the Alberta government website said. A province-wide ban was imposed on campfires in forests.

Canada, the world’s fifth-largest crude supplier, produces most of its oil from the oil-sands reserves of northern Alberta. The country will produce about 2.3 million barrels a day from the oil sands this year, according to the Canadian Association of Petroleum Producers.