Wildfires in Canada Force Evacuations, Cut Oil and Gas Output

(Bloomberg) -- Wildfires raging across western Canada forced the evacuation of 30,000 residents and cut at least 195,000 barrels a day of oil and gas production as companies shut down wells and pipelines. 

A total of 100 blazes were burning Monday afternoon, with about a quarter classified as out of control. The province of Alberta declared a state of emergency, and evacuation orders were issued for communities, including some less than 100 kilometers (62 miles) from the provincial capital of Edmonton. 

The fires are striking Canada’s main natural gas production region, including the prolific Montney and Duvernay formations, an area studded with wells and processing plants and crisscrossed by pipelines. The region also is a major center for light-oil production, and the disruptions have sent prices for some local grades of crude surging.

Edmonton Mixed Sweet’s discount to West Texas Intermediate narrowed by more than a third to $2.50 a barrel, the smallest discount since March, and Syncrude Sweet’s premium grew to $3.50 a barrel, data compiled by Bloomberg show. Condensate’s discount narrowed to $3.20 a barrel.

Wildfires are one of the most dramatic signs of climate change, with extreme heat and long-lasting drought creating the perfect conditions for infernos. Large areas of British Columbia, Alberta and Saskatchewan were gripped by drought through March, according to the North American Drought Monitor. Slightly more than 44% of Alberta was experiencing drought, the monitor said on April 22.

One community under evacuation order as of Sunday was Fox Creek, a major center for light-oil and gas drillers. Energy facilities and local residents were also being evacuated in Grande Prairie, provincial officials said.

Alberta oil and gas production has a history of being disrupted by wildfires, including a massive blaze in 2016 that shut down more than 1 million barrels a day of output from the oil sands in the province’s eastern region.

Prime Minister Justin Trudeau is scheduled to speak with Alberta Premier Danielle Smith on Monday about the fire situation. 

Below is a summary of updates from companies operating in the area:

• Baytex Energy Corp. has cut the equivalent of about 10,000 barrels of daily oil production, with 70% of the output being crude oil.
• NuVista Energy Ltd. shut about 40,000 barrels of oil equivalent a day of production after depressurizing operations close to fires.
• Whitecap Resources Inc. shut production near wildfires, and the company is assessing the situation’s effect on its second-quarter volumes.
• Crescent Point Energy Corp. has shut in 45,000 barrels a day of production in the Kaybob Duvernay region, though the company said it has seen no damage to its assets.
• Vermilion Energy Inc. temporarily shut 30,000 barrels a day of production, but added in a statement that initial assessments indicate minimal damage to key infrastructure.
• Pipestone Energy Corp. has shut in around 20,000 barrels a day of production, the company said in a statement.
• Tourmaline Oil Corp. has closed down nine South and West Deep Basin gas processing facilities as nearby fires expanded and new wildfires rapidly emerged.
• Paramount Resources Ltd. has shut the equivalent of about 50,000 barrels a day of oil production as of May 5 as a precaution and because of disruptions to third-party infrastructure, the company said Sunday. Its operations in the Grande Prairie and Kaybob regions are being affected.
• TC Energy Corp. halted two compressor stations on its Nova Gas system nearest to active wildfires, the company said in an email Sunday. Other sections of the system and other networks continue to operate safely. The company is keeping workers away from facilities near active blazes unless necessary.
• Tidewater Midstream & Infrastructure Ltd. shut its Brazeau River Complex, a gas processing facility, west of Edmonton and evacuated all personnel, the company said in an email. Company plans to send people to site Monday to assess damage and initiate the restart plan, which will depend on damage to power grid. The Ram River gas plant that was shut on Friday is expected to resume “shortly” pending regulatory approval.
• Cenovus Energy Inc. has shut down some production and halted plants in some areas, a company spokesperson said.
• Kiwetinohk Energy Corp. shut in the majority of its Placid operations in response to third-party service interruptions.
• The government-owned Trans Mountain Pipeline, the sole link carrying Canadian crude to the Pacific coast, is still in operation but the company has deployed mitigation measures, including a perimeter sprinkler system at its Edson pump station, and is ready to deploy additional protection measures if needed, the company said.
• Tamarack Valley Energy Ltd. had to shut in less than 300 barrels a day of production after the gas processing plants operated by Tidewater and another run by Keyera Corp. went out of operation due to the blazes, Chief Executive Officer Brian Schmidt said by phone.
• Pembina Pipeline Corp. also said it evacuated some workers west of Edmonton.

(Updates with Baytex, NuVista, Whitecap outages in bullet points)

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