CALGARY — As oilsands companies scramble to determine when they can start producing oil again in fire-ravaged northern Alberta, the industry is estimated to be losing $70 million every day that production is off line.
“There are a lot of fixed costs that don’t go away by just shutting in your production,” ARC Financial vice-president of energy research Jackie Forrest said, pointing to employee salaries, and in some cases pre-paid diluent costs and fixed pipeline costs.
She said the industry is losing about $70 million per day in forgone revenues, given that one million barrels of various grades of daily oil production are shut in because of the fires raging around Fort McMurray.
Fort McMurray small businesses forced to leave everything behind face uncertain future after the fireSpared the flames so far, oilsands producers, refiners see prolonged shutdown from Fort McMurray fire
“Your quarterly numbers are going to be quite damaged by this because not only do you have lost revenue, but you have a lot of expenses that didn’t go away,” she said.
Industry analysts say projects could be re-started as soon as a week after the threat of the fire has passed, given potential complications with pipelines and power lines connected to the projects.
Spokespeople for a number of the oilsands companies affected say there will be additional complications involved with flying sufficient staff back up to northern Alberta and providing them with food and lodging in the area.
Martin King, vice-president, institutional research, for FirstEnergy Capital Corp. said in a research note that “even if the fire threat is relatively short lived (hopefully), lasting no more than a few days, getting all of the sites and pipelines back to full operation could be time consuming, running a week or more.”
Forrest noted that wildfires last year near Cold Lake forced oilsands projects offline on June 9, but some were able to resume producing two days later. “Assuming there’s no damage, they can restart fairly quickly,” she said in an interview.
The fire levelled some neighbourhoods in Fort McMurray and has threatened oilsands projects surrounding the city. It caused minor damage to Nexen Energy ULC’s facilities, according to the province’s emergency response teams, and also lead to power outages around the plant on Friday afternoon, data from the Alberta Electric System Operator indicated.
ConocoPhillips Canada spokesperson Rob Evans said staff at his company watched on video the fire approach its 12,000 barrels per day Surmont plant before it eventually moved away from the project without causing damage.
“You don’t really know until you get up there,” Evans said of what is needed to re-start Surmont, adding that the company is coming up with a number of contingency plans to begin production.
Evans said ConocoPhillips has two teams working rotating 12-hour shifts in an emergency operations centre at its downtown Calgary office to determine when the company could resume production.
“We are currently working on re-start plans,” Syncrude Canada Ltd. spokesperson Leithan Slade said of his company’s 350,000-bpd oilsands mining facilities north of Fort McMurray, adding that he did not have a timeframe for resuming production.
Similarly, Husky Energy Inc. spokesperson Mel Duvall said in an email it is too early to know when his company would restart operations. “It is dependent on a number of factors, the most important of which is the safety of personnel,” he said.
Suncor Energy Inc., Canada’s largest energy company, and Shell Canada Ltd. both issued releases on the weekend that said there was no specific timeline for restarting their projects, which producing 300,000 bpd and 255,000 bpd before the fire, back up and running.
Alberta Premier Rachel Notley is set to meet Tuesday morning with the oilsands chief executives to determine when output might resume following the shut-ins that have disrupted close to 40 per cent of total oilsands output.
RBC Economics said last week that if the shutdowns last more than two weeks the effect could shave half a percentage point off Canada’s gross domestic product for the month of May.