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UPDATE 2-Canada oil output cut as Alberta wildfires rage
May 17, 2011 / 7:43 PM / 7 years ago

UPDATE 2-Canada oil output cut as Alberta wildfires rage

* 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 (Reuters) - 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 dangerous.”

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 closed down.

Market sources said the shutdowns had yet to move prices for heavy crude, but cautioned that lengthy outages could tighten supplies.

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 here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

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 Alberta.

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)

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