* Fires continue to burn across northern Alberta
* Production halted by fire threat, pipeline closure
* About 100,000 bpd may soon be shut in
(Adds details, Canadian oil prices)
By Scott Haggett and Jeffrey Jones
CALGARY, Alberta, May 17 Canadian oil
production cuts could more than double over the next few days
as companies move to protect employees and property from
wildfires raging through northern Alberta and cope with the
shutdown of a key pipeline.
Oil companies had shut in close to 50,000 barrels per day
of production on Tuesday because of wildfires in the Western
Canadian province. Further cuts are expected as big fields are
closed in because they cannot ship their oil to market.
Canada is the largest supplier of oil to the United States,
exporting more than 2 million barrels a day. The amount shut in
by fires and outages is a small fraction of that total.
About 100 wildfires are burning in Alberta, spurred by warm
temperatures and gusting winds, with 23 considered out of
control in a fire season unlike any seen before.
"We are facing something largely unprecedented," Colin
Lloyd, executive director of the Alberta Emergency Management
Agency, told reporters. "The situation overall is very
Almost 260,000 acres (1,050 sq km) have burned since the
emergency began over the weekend, more than the province lost
to fire in all of 2010, officials said.
The worst damage is concentrated in the Lesser Slave Lake
region of northern Alberta, about 200 km (125 miles) north of
the provincial capital of Edmonton. There, fires destroyed 40
percent of the town of Slave Lake on the weekend, forcing
officials to evacuate most of the 10,000 residents of the oil,
gas and forestry hub.
There have been no official estimates of the cost of the
fire damage yet.
For oil producers operating in the rugged, heavily forested
region of northern Alberta, fires are a common threat. But the
infernos seen over the past few days are surprising even
seasoned industry veterans.
"I would think probably every year the industry has an
issue with forest fires," said John Langille, vice-chairman of
Canadian Natural Resources Ltd (CNQ.TO), the country's biggest
independent oil producer. "I don't think any have been this
dramatic -- certainly none have burned a town down."
The fires forced the closure of the southern leg of Plains
All American Pipeline LP's (PAA.N) Rainbow pipeline on Sunday,
the key conduit for oil producers in the region, shutting in
tens of thousands of barrels of production.
Canadian Natural is slowing output at its Pelican Lake
heavy oil field in Alberta, ahead of an increasingly likely
shutdown, due to Rainbow's closure.
The company is filling up storage tanks at the 40,000
barrel a day facility and those are nearing capacity, President
Steve Laut told reporters. When they fill, the field will have
to be shut in, adding to the tally of production cuts.
Fire is threatening more of the company's northern Alberta
properties as well. It evacuated 1,300 workers on Monday from
camps near its Horizon oil sands project when a blaze got
within 150 metres (500 feet) of one facility.
As well, properties producing 3,125 bpd of oil and 8
million cubic feet of gas that are threatened by fire have been
Market sources said the shutdowns had yet to move prices
for heavy crude, but cautioned that lengthy outages could
Western Canada Select heavy blend, a widely traded oil
grade, was selling for about $17.45 a barrel under benchmark
West Texas Intermediate for June delivery, down from a discount
of $17.00 a day earlier.
Factbox on affected energy operations: [ID:nN17146041]
Link to map of fire locations
Cenovus Energy Inc (CVE.TO) said on Tuesday it is scaling
back production at its 22,000 bpd Pelican Lake heavy oil field
because of the Rainbow shutdown. Now pumping oil into storage,
output at the field is down to 11,000 bpd and will be reduced
further. Unless production is further slowed, the tanks will be
full early on Thursday and operations will be halted.
"We may reduce production even more tonight but we still
anticipate our storage may be full sometime tomorrow," Rhona
DelFrari, a spokeswoman for the company, said in an email.
Other producers that have suspended some operations include
Penn West Petroleum Ltd (PWT.TO), which has shut 25,000 to
30,000 barrels a day of oil production in north-central
Royal Dutch Shell Plc (RDSa.L) also said on Tuesday it has
shut in its Cliffdale and Seal heavy oil properties in the
Peace River region, which are served by the Rainbow line, while
output at its Peace River thermal operations has been slowed.
Production from those fields averaged 21,000 bpd last year.
(Editing by Rob Wilson)