Enbridge restarts pipeline production after Fort McMurray fire

Share

The largest mover of oil sands crude in the fire-ravaged Fort McMurray area is restoring operations to its pipelines, although its chief executive officer cautions that it won't be without complications

The fires in northeastern Alberta halted the movement of an estimated 900,000 barrels of crude a day on the Enbridge Inc. system, according to CEO Al Monaco. The pipelines that connect bitumen resources to key North American oil markets, all of which run underground, were not damaged in the fires that continue to blaze. However, some Enbridge above-ground valve sites were damaged and power outages continue to be an issue, Mr. Monaco said during his company's first-quarter earnings call on Thursday. He hopes many issues will be resolved by the weekend. "So, good progress on getting our systems back in operation – but the process, I'll say, isn't like turning on a tap."

Enbridge's regional pipeline system in the Fort McMurray area was shut down May 4 – the day after an evacuation of more than 80,000 residents was ordered.

The shutdown was due to the danger from the fire itself as well as upstream production outages, he said. The company also evacuated staff from its Cheecham terminal, a major collection and distribution hub southeast of Fort McMurray.

On Wednesday, Enbridge resumed operations at the Cheecham terminal, and now has also begun injecting volumes into its Waupisoo pipeline, which runs from the Cheecham terminal to Edmonton, as well as the Athabasca pipeline, which stretches from south of Fort McMurray to near Hardisty, Alta. "That's not dependent on upstream volumes because we're able to draw down inventory that has built up in the tanks," Mr. Monaco said.

As of Thursday morning, Enbridge is also ready to restart its Woodland pipeline, which runs from Imperial Oil Ltd.'s Kearl bitumen mining project to the Cheecham terminal – but the company still needs to get permission to fly over the right-of-way corridor.

Mr. Monaco said that, given the continuing emergency, it was only late Sunday that the Canadian pipeline company was permitted limited access to its sites. Although it is only early days following the mass evacuation and the wildfire threat is still "extreme" according to provincial officials, Mr. Monaco doesn't at this point expect the fire will have a major impact on Enbridge's 2016 financials.

TransCanada Corp. facilities didn't suffer any effect to its oil-transport operations in the fire. But Alberta demand for natural-gas shipments dropped by about 15 per cent, in large part because oil sands customers shut in their operations due to the fire, according to spokesman Terry Cunha. Demand is picking up as bitumen producers once again increase their work.

"We remain ready to resume the safe delivery of natural gas into Fort McMurray as soon as we are given direction to do so," Mr. Cunha said Thursday.

Canadian National Railway Co. traffic to and from Fort McMurray has been suspended since the blaze intensified May 3, and there is no indication yet on when train service will resume, spokesman Mark Hallman said. CN normally operates three freight trains a week on that line. Mr. Hallman said it does not appear that the railway's facilities around Fort McMurray were damaged.

The U.S. Energy Information Administration (EIA) also took note of the fires' impact on Thursday, saying it expects the oil sands plant outages caused by the wildfires will reduce Canadian crude oil production by an average of 500,000 barrels a day in the second quarter compared with the first quarter of this year.

That is based on an estimate of one million barrels a day of production that was off line in recent days. Estimates among Canadian analysts have varied between one million and 1.5 million barrels a day.

Market intelligence firm Genscape said in a report Thursday that pipeline flows from Canada to the U.S. began to fall last week as the wildfire hindered production. For instance, for the week ended May 6, flow from Hardisty on TransCanada's 590,000-barrel-a-day Keystone pipeline into Steele City, Neb., declined significantly, by as much as 366,000 barrels a day, according to Genscape. The curtailment could increase in the coming weeks, it said, adding that oil-by-rail traffic has dropped as well.

The EIA, the statistics arm of the U.S. Department of Energy, pointed to risks that some of the outages could extend into the summer. However, output should rebound in the third quarter of the year, it said.

The numbers are critical to the United States. Canada is by far the largest foreign supplier of crude oil to the U.S., accounting for 44 per cent of U.S. imports in February, according to the agency.

Nexen Energy Inc., owned by Chinese state oil company CNOOC Ltd., has issued a force majeure for all of its May heavy crude oil production, Reuters reported, quoting trade sources. A force majeure exempts a company from delivering on a contract due to forces outside its control. Nexen's Long Lake oil sands project, located south of Fort McMurray, has been shut due to the wildfire threat.

Meanwhile, Suncor Energy Inc. said on Wednesday that construction at the company's $15-billion Fort Hills oil sands project, one of a few still moving forward amid the oil price collapse, was scaled back as the wildfires were at the worst. Work at the facility located 90 kilometres north of Fort McMurray is ramping up again, a company spokeswoman said.