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Oil production tanks in Alberta as wildfires threaten facilities

Oil storage tanks at Cenovus's operations at Pelican Lake

Rene Michaud - Bliss Photographi/EnCana Corporation

A dramatic drop in oil production around Slave Lake looms as major energy companies run out of storage space owing to the numerous wildfires hampering shipping routes and construction sites and threatening facilities in northern Alberta.

Cenovus Energy Inc. on Tuesday halved its oil production at its Pelican Lake project to about 11,000 barrels a day, down from 22,000 barrels a day. At this rate, its storage tanks will be full early Thursday and it will be forced to completely shut down production there, Rhona DelFrari, a spokesperson for the company, said Tuesday. Canadian Natural Resources Ltd. is facing even larger cuts in the same region, and may soon shut in production of roughly 40,000 barrels of oil a day at Pelican Lake.

Both companies rely on the Rainbow pipeline to ship crude out of the area, but the southern part of that line has been turned off because of the forest fires, and the northern part has been shut down since late April because of a major spill.

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"The region has shut off the power for safety reasons. So when there's no power, the pipeline can't run," CNRL president Steve Laut said on Tuesday.

"Probably in the next day or so, Pelican will be shut down, unless the pipeline starts back up again," Mr. Laut said. Rainbow's owner does not know when it will be able to resume activity.

Cenovus, which twice curtailed production Tuesday, said it could stretch production beyond Thursday if it slows activity at Pelican Lake. Penn West Exploration on Monday shuttered oil and gas production in the region as well.

About 100 wildfires are burning in Alberta, with 23 of those out of control, the province said Tuesday. The blazes have burned about 105,000 hectares of land. The Slave Lake region has been particularly hard hit, with 15 wildfires burning out of control there.

CNRL's problems are exacerbated, however, by fires burning about 60 kilometres north of Fort McMurray, the heart of Canada's oil sands industry. CNRL has already turned off the taps on about 3,000 barrels a day of oil equivalent production and has moved more than 1,000 employees.

It continues to keep some workers away from its Horizon oil sands mine, and says forest fires have temporarily halted repairs to the plant's upgrader, which was scorched by an operational blaze in January.

"On the repairs, obviously, we haven't done anything [Monday]" Mr. Laut said. "I don't know if we're doing anything today, mainly because there's a lot of smoke going through."

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The company has also been covering its piles of sulphur with foam and water in order to protect them from catching fire. Oil sands miners remove sulphur from bitumen and store it in what are often massive piles. Those piles are flammable, and embers from the forest blaze have been landing on CNRL's sulphur stockpile, Mr. Laut said.

Syncrude Canada Ltd., Canada's second-largest oil sands outfit, evacuated some of its non-essential employees such as office staff from its Aurora bitumen mine site Monday afternoon, but those employees have since returned, Cheryl Robb, a spokeswoman for the company, said Tuesday. Aurora is about 60 kilometres north of Fort McMurray, and is close to CNRL's Horizon operation.

Ms. Robb said Syncrude is making evacuation decisions based on consultation with Alberta's Sustainable Resource Development department, which is co-ordinating the province's response to the crisis.

Syncrude's primary site at Mildred Lake, which houses far more infrastructure than Aurora, is about 35 kilometres north of Fort McMurray and is not under threat. Suncor Energy Inc. , the largest oil sands operator, has its main site right next to Syncrude's flagship operation.

Pengrowth Energy Corp. , BlackPearl Resources Inc. , and Baytex Energy Corp. are also among those that have trimmed operations. Pengrowth, for example, cut 5,000 barrels of oil equivalent a day in northern Alberta.

A string of oil and gas outfits reported shutdowns and evacuations Monday. Penn West Exploration halted production of between 25,000 and 30,000 daily barrels of oil at operations threatened by a number of fires. Imperial Oil Ltd. on Monday stopped construction at a water facility necessary for its Kearl oil sands mine, a project that is still being built. About 250 contract employees were moved from the water facility, which is about 40 kilometres northwest of the mine site. Building activity is still happening there.

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A much smaller company, Exall Energy Corp. , stopped producing 921 barrels of oil a day at its Marten Mountain site near Slave Lake after Enerchem International Inc., which buys Exall's crude, issued a force majeure statement. Devon Energy Corp. also trimmed a small amount of production in Alberta.



With a report from Reuters

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About the Authors
Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More

Carrie Tait joined the Globe in January, 2011, mainly reporting on energy from the Calgary bureau. Previously, she spent six years working for the National Post in both Calgary and Toronto. She has a master’s degree in journalism from the University of Western Ontario and a bachelor’s degree in political studies from the University of Saskatchewan. More

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