Canadian oil producers warn of supply shortfalls after wildfire

WANDERING RIVER, Alberta (Reuters) - CNOOC Ltd’s Nexen is the latest Canadian oil sands company to warn customers it may not be able to fulfill supply contracts in the wake of a massive wildfire, as producers scramble to get facilities back online.

Nexen has issued a force majeure for all of its May production of Canadian heavy crude, two sources said on Thursday. Four major oil firms have now declared force majeure, a contract clause to remove liability for unavoidable catastrophes.

The fire that blazed through oil sands hub Fort McMurray, forcing the evacuation of about 90,000 people last week, has moved into sparsely populated woodlands further east.

It spans 241,000 hectares (596,000 acres), growing much more slowly than before, but still posing a threat. Cool temperatures are helping contain it, but hot, dry weather is expected starting Saturday, said Chad Morrison, Alberta’s senior wildlife manager.

“We’re long from over in this fight,” he said on a conference call with other officials.

Nexen’s Long Lake facility, located south of the community known as Fort Mac, sustained minor damage from the fire, Alberta officials said this week.

Three major oil firms warned last week they will not be able to deliver on some contracts for Canadian crude.

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BP Plc and Phillips 66 alerted customers some grades of Canadian crude would not be available, while Suncor Energy, Canada’s largest producer, warned clients that some supplies from the region would be disrupted by the fires.

While downtime has crimped supplies, Enbridge Inc said late Wednesday it had restarted its 550,000 bpd Line 18 pipeline, and Royal Dutch Shell Plc has also partly resumed operations in the area.

Roughly 1 million barrels per day (bpd) of output were shut down during the fire, about half the oil sands’ usual daily production. Alberta holds the world’s third-largest crude reserves and is the No. 1 exporter of crude to the United States.

No oil sands sites are under immediate threat from the fire, which is burning about 15 kilometers (9.3 miles) from the neighboring province of Saskatchewan, Morrison said.

U.S. oil prices dipped on Thursday after jumping to six-month highs, when buying on a forecast for tighter global supplies gave way to selling. [O/R]

Travel to Fort McMurray is restricted to essential services, including workers, supplies and equipment for oil sands operations. Suncor workers are expected to begin returning to shuttered facilities on Thursday.

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Hundreds of people lined up around the evacuee center in Lac La Biche, Alberta, on Thursday to collect provincial government debit cards loaded with C$1,250 per adult and C$500 per dependent.

“I just think for government, this could have been organized better,” said Wanda Anderson of Fort McMurray, about the debit card distribution, standing in line wrapped in a purple blanket as morning temperatures hovered just above freezing.

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Even so, Anderson, who is staying in a trailer park with her family, said they have been well cared for with meals, and her kids are enrolled in local schools.

Alberta Municipal Affairs Minister Danielle Larivee said the idea behind the debit cards was to give residents immediate access to cash.

The Canadian Red Cross is also distributing C$50 million ($38.93 million) in donated funds, or C$600 for each adult and C$300 for each child.

Evacuees who had been sleeping on cots in a hockey rink in Lac La Biche were moved late Wednesday to longer-term housing in the towns of Bonnyville and St. Paul, Alberta, about 120 to 130 km (72 to 78 miles) to the southeast. A plan to allow residents to return, either permanently or to view their homes, is about 10 days away, Larivee said.

In the meantime, government officials said there is much work to do to restore the community’s only hospital, after it was damaged by smoke and water, as well as natural gas, water and other infrastructure.

While the community rebuilds, providers of temporary housing, such Civeo Corp and Target Logistics [AGSCS.UL], have seen demand spike.

In another sign of life returning to normal in the oil sands, Syncrude Canada Ltd reported its herd of 300 bison, which grazes on a reclaimed area of the oil sands mine site, was doing well after being left behind during the evacuation.

Additional reporting by Nia Williams in Calgary and Catherine Ngai in New York; Writing by Rod Nickel in Winnipeg, Manitoba; Editing by James Dalgleish and Cynthia Osterman