Canada oil sands operators start return as fire eases

Canadian oil sands
Alberta oil sands

Companies in Alberta prepared to return to work as rain eased a wildfire that prompted the shutdown of 10 percent of Canada’s oil-sands production.

Canadian Natural Resources Ltd.’s operation staff received permission today to go to the Primrose oil sands site to implement a “step-by-step recovery plan,” Julie Woo, a company spokeswoman, said in a statement Monday.

Cenovus Energy Inc. plans to send essential staff to the Foster Creek project once a government team assesses potential hazards, the company said on its website.

A wildfire on the Cold Lake Air Weapons Range has burned more than a week, prompting the shutdown of about 230,000 barrels a day of oil sands output.

The wildfire’s danger was reduced yesterday when 8 millimeters (0.3 inch) of rain fell, Forest Information Officer Leslie Lozinski said by e-mail.

Canadian Natural’s assessment of the 80,000-barrel-a-day Primrose site will determine the timing for return to full operation, Woo said.

Cenovus said it plans to inspect its 135,000-barrel-a-day Foster Creek site and begin startup procedures once it gains access.

The Alberta wildfires and upgrader maintenance may have cut Canadian crude output in May below 4 million barrels a day, a two-year low, Barclays Plc said in a report. Production averaged 4.38 million in 2014, according to the U.S. Energy Information Administration.

Heavy Western Canadian Select crude’s discount to U.S. benchmark West Texas Intermediate was unchanged today at $7.85 a barrel, holding at the narrowest level since 2012, data compiled by Bloomberg show.

In addition to production cuts at Foster Creek and Primrose, Canadian Natural reduced output at its Kirby South project by 18,000 barrels a day because of the fire. Restoring Kirby South operations depends on the return to operation of a third-party pipeline, the company said.

Canada, the world’s fifth-largest crude supplier, produces most of its oil from the oil-sands reserves of northern Alberta. The country will produce 2.3 million barrels a day from the sands this year, according to the Canadian Association of Petroleum Producers.