Wildfires Erupt in Canada Crude Patch in Threat to Oil Sands

(Bloomberg) -- Hot and dry weather is spawning dozens of new wildfires across Alberta, with blazes threatening more than 400,000 barrels a day of Canada’s oil production.

In the past 24 hours, 47 new fires emerged in the province, most of them in the Lac La Biche region, which is south of Fort McMurray, said Kai Bowering, spokesperson for Alberta Wildfire. The arid conditions are expected to persist for the next 24 hours, making it easier for the blazes to spread, Bowering said. 

Wildfires in Alberta this year have reduced production from the oil sands — the world’s third-largest crude reserves — and forced a partial evacuation of Fort McMurray in May. A new bout of hot weather has inflamed fire activity in recent weeks, with more than 50 out-of-control blazes burning in Alberta currently and more than 10% of the province’s oil output under threat.

One 3-hectare (7-acre) fire is within about 10 kilometers (6.2 miles) of MEG Energy Corp.’s Christina Lake site, which produced almost 100,000 barrels a day in May, according to Alberta Energy Regulator data. Another blaze is within 10 kilometers of a section of Imperial Oil Ltd.’s Cold Lake operation that produces 19,000 barrels per day, and a third is close to Canadian Natural Resources Ltd.’s Kirby oil sands. Canadian Natural’s operations are stable, and Imperial Oil has experienced no impact from the fires, the companies said in emails. MEG didn’t respond to an email seeking comment. 

The fires helped boost Canadian heavy crude prices. Western Canadian Select’s discount to benchmark West Texas Intermediate narrowed to $13.10 a barrel on Wednesday from $14 a barrel on Tuesday, according to a person familiar with prices.

Suncor Energy Inc. curtailed production from its Firebag site two weeks ago, reducing output from a facility that produced about 231,000 barrels a day in May. The same blaze prompted Cenovus Energy Inc. to demobilize some workers from its Sunrise oil-sands site and Imperial Oil to begin removing non-essential workers from its Kearl oil-sands mine.

Temperatures as high as 32C (90F) Wednesday, low relative humidity and winds gusting up to 30 kilometers an hour in northeastern Alberta may contribute to “extreme fire behaviour” lasting for the next few days, Alberta Wildfire said in an update. 

The fire affecting Suncor, Cenovus and Imperial has moved closer to the production sites in recent days, as has an out-of-control wildfire about 9 kilometers to the south. Fires southwest of Fort McMurray have also affected production. Greenfire Resources Ltd. last weekend temporarily curtailed output from its Hangingstone sites, which produces about 23,000 barrels a day. 

(Updates with company comments in fourth paragraph. A previous version corrected the title in the second paragraph.)

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