Oil Sands in Canada Face Fire Threat as Temperatures Rise

(Bloomberg) -- Canada’s main oil-producing region in northeastern Alberta faces an increased risk of wildfires as temperatures rise over the weekend, provincial officials said. 

This month’s blazes have largely spared the oil sands, but they have hammered the province’s drought-stricken west, forcing the evacuation of as many as 30,000 people and curtailing natural gas output. That pattern is threatening to shift this weekend as temperatures rise and conditions dry out across northern Alberta, Christie Tucker, wildfire information officer, said Thursday. 

“The northeast has been relatively less affected than other parts of the province so far,” she said at a press conference. “But that could certainly change because they will be seeing similar conditions to other parts in the north of the province.”

Oil and gas producers have brought output back online in recent days as the blazes in the west die down. Crescent Point Energy Corp. has now restored 85% of the 45,000 barrels a day of oil equivalent Kaybob Duvernay production that was shut due to the fires, up from 75% two days ago, the company said Friday. Chevron Corp., which had evacuated its facilities earlier in the week, has “resumed operations in the Kaybob Duvernay outside of the fire affected area,” spokeswoman Deena McMullen said by email. 

Pembina Pipeline Corp. said Thursday that facilities shut due to fires have resumed operations. Peyto Exploration & Development Corp. also said it has restored essentially all production from two plants that were shut. 

The output cuts may have affected flows of the light condensate that’s mixed with oil-sands crude to help it move through pipelines, helping strengthen prices for Canadian heavy oil. On Friday, Western Canadian Select’s discount to the US benchmark narrowed 25 cents to $12.85 a barrel, the narrowest in more than a year, data compiled by Bloomberg show. AECO gas prices in Alberta rose 2.9% to C$2.12 per million British thermal units on Thursday.

This year’s wildfires have been far less destructive than those that tore through Canada’s oil sands region seven years ago. The blazes of 2016 shut down more than 1 million barrels of daily crude production and razed whole sections of Fort McMurray, the region’s main city. 

Rain showers have helped firefighters bring the most recent series of fires under control in recent days. There are now 74 wildfires, down from more than 80 on Thursday and more 100 earlier in the week. A total of 20 fires are still considered out of control. But Fort McMurray is expected to see temperatures of 32C (90F) on Sunday, according to Environment Canada.

The number of evacuees has fallen to fewer than 17,000 from as many as 31,000 earlier in the week. Meanwhile, hundreds of members of the Canadian armed forces are being deployed in areas including Grande Prairie, Fox Creek and Drayton Valley areas to assist in battling the blazes. 

(Updates prices in sixth paragraph)

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