Blaze in Canada cuts oil-sands output 10%

Wildfires in northern Alberta have spread farther into the oil sands area, keeping about 10 percent of production offline and pushing Canadian crude prices higher.

A fire at Cold Lake Air Weapons Range that started Saturday expanded to cover 43,000 acres as fire crews worked to prevent the blaze from reaching Cenovus Energy Inc.'s Foster Creek oil sands facilities, Alberta's Environment and Sustainable Resource Development agency said on its website. Another fire near the town of Chard grew to 3,400 acres 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.

Nonconventional oil production represents about 2 percent of Canada's economy and the impact may slow second-quarter gross domestic product growth as much as 0.3 percentage point, Nick Exarhos, an economist at CIBC World Markets in Toronto, said Wednesday.

"If production itself takes a hit, that will show up in the monthly GDP numbers," he said. "It will have a bigger effect if it persists into June."

The disruptions came as prices for heavy Canadian crude have been at their strongest levels relative to West Texas crude prices 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.

The Cold Lake Air Weapons Range fire is 2 or 3 miles southeast of Cenovus' Foster Creek operations, Forest Information Officer Leslie Lozinski said. Crews were working Wednesday to contain the fire before a cold front blows through with winds from the north, she said.

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

The Chard blaze is burning between Pony Creek and Waddell Creek, in an area of pipelines, oil wells, rail lines and a power line. That fire has prompted the evacuation of some isolated oil-sand wells that are each manned by one or two people, Lozinski said.

Canadian Natural Resources Ltd. said Monday that 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 workers, spokesman Brad Bellows said Tuesday. Production had been been ramping down since last week, although some continues, he said. Statoil ASA said Tuesday that it planned to evacuate nonessential employees from its Leismer site, which remains in operation, spokesman Knut Rostad said in an email Tuesday.

Uncontrolled fires also were burning farther west in the Slave Lake area, the Alberta government website said. A provincewide 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.

Business on 05/28/2015

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