Some oil and gas companies in Alberta are once again shutting down production as drought and heat have worsened the wildfire situation in the energy-producing province.
The volatility caused by changing winds and changing temperature conditions, combined with the sheer size of the affected geographic area, makes any reading of the situation difficult, even for businesses that are directly impacted, noted the President and CEO. management of Whitecap Resources, Grant Fagerheim.
“We try to stay above the fray. We are in constant communication with our supervisors in the field, explained Mr. Fagerheim. But we are living in real time right now. »
Whitecap has drilling operations in central and northern Alberta and northeastern British Columbia, and Mr. Fagerheim has spent the past 10 days assessing and responding as existing fires develop. move and spread and new fires appear in other places.
The company first decided on May 5 to temporarily cut production by 12,000 barrels per day, then increased that cut to 40,000 barrels last Sunday. It restarted some of its operations in the past week as cooler temperatures and rain brought respite to some areas, but conditions deteriorated again on Tuesday.
The company’s production cut is now about 27,000 barrels per day, and Fagerheim estimates that hundreds of company employees and contractors have evacuated sites or are ready to do so.
Other employees work long days in hot, smoky conditions to keep infrastructure and equipment safe. Near the town of Fort St. John, B.C., where an evacuation alert has been issued, the company’s operations are operating on emergency power as more than 100 utility poles burned down, the company said. Mr Fagerheim.
While no company infrastructure was damaged, Fagerheim noted, in some areas the blazes occurred “inside a right-of-way” of Whitecap operations.
“People are tired. It’s tiring. They are trying to take care of their families, to get their families out of their homes, into temporary accommodation, he explained. Our number one priority is the safety of our staff, contractors and their families. »
Alberta currently has 87 active wildfires, 24 of which are out of control.
Production forecasts revised downwards
On Tuesday, Crescent Point Energy said it had once again shut down all of its production in the Kaybob Duvernay area, representing the equivalent of 45,000 barrels of oil per day, after previously reactivating some of that production last week.
Other affected producers include Paramount Resources — which temporarily cut production by about 45,000 barrels a day in Alberta’s Grande Prairie and Kaybob areas — and Baytex Energy, which cut its production by about 24,000 barrels a day. per day due to its own closures, as well as third party outages.
On Monday, Vermilion Energy lowered its second-quarter production forecast due to the wildfire situation, saying it now expects fiscal second-quarter production to average between 80,000 barrels per day. and 83,000 barrels per day, down from a previous forecast of 84,000 barrels per day to 86,000 barrels per day.
Toronto-based energy analyst Rory Johnston, founder of the Commodity Context newsletter, said the companies affected by the fires were much smaller than the huge oil sands companies that were affected by the Fort McMurray fire in 2016. .
This event led to a temporary drop of 14% in crude oil exports from Alberta, as oil sands facilities had to be taken out of service and had to wait several months before being fully restored.
But Mr Johnston added that while oil and natural gas prices were not yet badly affected by the situation, the longer the current fire situation drags on, the more likely it is that the companies affected will see their results from the second trimester suffer.
“My general feeling is that while it won’t be important for the market yet, it could be important for some of these growers,” he said.
He added that increased wildfire activity in the coming years will add more volatility to Canada’s energy sector.
“Wildfires are turning into a very unpredictable perennial risk for the sector,” Johnston said.