Alta. oilpatch once again shuts in some production as wildfires rage

Amanda Stephenson, 

The Canadian Press

May 16,2023

Some oil and gas companies in Alberta are once again shutting in production as hot and dry conditions exacerbate the wildfire situation in the energy-producing province.

Volatility caused by shifting winds and changing temperature conditions, combined with the sheer size of the geographic area affected, is making it hard even for companies that are directly affected to get a good read on the situation, said Grant Fagerheim, president and CEO of Whitecap Resources Inc.

"You’re trying to stay on top of it. You're in constant communication with your field supervisors," Fagerheim said. "But we're living in real time right now."

Whitecap has drilling operations across central and northern Alberta and into northeast B.C., and Fagerheim has spent the last 10 days assessing and reacting as existing fires move and spread and new blazes pop up in other locations.

The company first moved to temporarily shut in 12,000 barrels per day of production on May 5, then increased that to 40,000 last Sunday. It restarted some of its operations this week as cooler temperatures and rain brought relief in some areas, but conditions worsened again on Tuesday.

The company now has approximately 27,000 barrels per day of production curtailed, and Fagerheim said he estimates that hundreds of the company's employees and contractors have either been evacuated or are prepared to evacuate.

Other employees are working long days in hot, smoky conditions to ensure the safety of infrastructure and equipment. Near the city of Fort St. John, B.C., which is under an evacuation alert, the company's operations are running on back-up power because more than 100 power poles have burned down, Fagerheim said.

While none of the company's infrastructure has been damaged, Fagerheim said in some regions, flames have been "within a road allowance" of Whitecap's operations.

"People are tired. This is tiring. They’re trying to take care of their families, moving their families out of their homes, into temporary housing," he said. "Our number one priority is the safety of our staff and our contractors and their families.”

There are currently 87 active wildfires in Alberta, 24 of which are out of control.

On Tuesday, Crescent Point Energy Corp. said it has once again shut in its entire production in the Kaybob Duvernay area, representing 45,000 barrels of oil equivalent per day (boe/d), after previously reactivating a portion of that production last week.

Other affected producers include Paramount Resources Ltd. — which has temporarily curtailed approximately 45,000 boe/d in the Grande Prairie and Kaybob regions of Alberta — and Baytex Energy Corp., which has curtailed approximately 24,000 boe/d due to its own shut-ins as well as third-party interruptions.

On Monday, Vermilion Energy Inc. lowered its second-quarter production guidance as a result of the wildfire situation, saying it now expects production in the second quarter of the year to average 80,000 to 83,000 boe/d, down from a previous forecast of 84,000 to 86,000 boe/d.

"On any given day, I think the situation's pretty dynamic," said ATB Capital Markets analyst Patrick O'Rourke. "Back of the envelope, I'd say a couple of hundred thousand boe/d (in total) could be shut in right now."

That works out to about 10 per cent of total production from the Western Canadian Sedimentary Basin, O'Rourke said.

Rory Johnston, a Toronto-based energy analyst and founder of the Commodity Context newsletter, said the companies affected by the fires are much smaller than the massive oilsands corporations that were affected by the Fort McMurray wildfire in 2016.

That event resulted in a temporary 14 per cent decline in crude oil exports from Alberta as oilsands facilities had to be taken off-line and were not fully restored for several months.

But Johnston said while oil and gas prices are not yet seeing much of an impact, the longer the current fire situation lasts, the more likely it is that the affected companies will see their second-quarter earnings suffer as a result.

“My general feeling is that while it’s not going to be material yet for the market, it could be material for some of these producers," he said.

He added that increased wildfire activity in the years ahead will add more volatility to the Canadian energy sector.

“Wildfires are turning into this very unpredictable perennial risk for the sector," Johnston said.

Return of fires in Canada’s gas regions prompts new outages

Sheela Tobben and Natalie Obiko Pearson,

Bloomberg News

May 15,2023

The Bald Mountain Wildfire is shown in the Grande Prairie Forest Area on Friday May 12, 2023 this handout image provided by the Government of Alberta. 

(THE CANADIAN PRESS/HO-Government of Alberta Fire Service)

A resurgence of wildfires across Canada’s main energy-producing province over the weekend prompted some drillers to suspend portions of their production again.

Paramount Resources Ltd. and Pipestone Energy Corp. both temporarily halted some output starting Friday after blazes resurfaced and shut down third-party gas-processing facilities they use.

There were 84 active wildfires in Alberta as of Monday afternoon, with 23 considered out of control. That compares with 87 active fires and 24 out of control on Sunday.

“The fire danger is extreme,” Josee St-Onge, spokeswoman for Wildfire Alberta, said at a news conference Sunday. “Our peak burning period — which is when the temperatures are at their highest and the fuels are at their driest — is still in front of us.”

Extreme heat warnings were in effect across much of the province. Temperatures in Manning, a town in the province’s north, surged to 30.9C on Sunday — some 14 degrees above normal for this time of the year, according to data from Environment Canada.

“Hot and dry conditions throughout much of Alberta present an ever increasing risk of new wildfires starting and the potential for current wildfires to grow quickly,” said Colin Blair, executive director of the Alberta Emergency Management Agency.

Crude inventories across monitored sites in western Canada are sitting at 30.69 million barrels, according to data from geoanalytics firm Kayrros SAS. That’s broadly steady from May 1, but about 2 million barrels below volumes on April 15.

The return of the fires has raised prices for some Canadian crudes. The discount for heavy Western Canadian Select versus Nymex oil futures narrowed 35 cents to US$12.50 a barrel on Monday, the smallest in more than a year.

More than 1,500 people were fighting fires on Sunday, while helicopters were deployed to drop buckets of water on hotspots. An additional 200 firefighters had arrived from the US, St-Onge said. More than 19,0000 residents had been evacuated.

In 2016, wildfires tore through Aberta’s oil sands, shutting down more than 1 million barrels of daily crude production and razing whole sections of Fort McMurray, the biggest city in the oil-sands region. This month’s blazes have largely spared the oil sands, but they’ve hammered the province’s drought-stricken west, forcing the evacuation of as many as 30,000 people and curtailing natural gas output.

OPERATIONAL UPDATES

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

• Paramount Resources said it again temporarily cut 45,000 barrels of oil equivalent a day of production in the Grande Prairie and Kaybob regions Friday. It also said the third-party Wapiti natural gas processing facility was halted that day.
• Pipestone Energy said around 20,000 barrels of oil equivalent a day production has been temporarily curtailed since Friday.
• Vermilion Energy Inc. has restored 60 per cent of the roughly 30,000 barrels of oil equivalent a day it shut this month in response to wildfires. The company cut its second-quarter output targets because of the fires.