Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

14 million barrels
or about $760-million

The risk of damage to oil sands plants in Alberta has receded, but the impact of the wildfires on the petroleum industry will be felt for weeks. Brent Jang reports on the unprecedented series of shutdowns and what lies ahead for producers

The Syncrude Canada Ltd. mine stands at the Athabasca oil sands in this aerial photograph taken near Fort McMurray, Alberta, Canada, on Thursday, June 4, 2015.

The Syncrude Canada Ltd. mine stands at the Athabasca oil sands in this aerial photograph taken near Fort McMurray, Alberta, Canada, on Thursday, June 4, 2015.

Ben Nelms/Bloomberg

The wildfires in the Fort McMurray region have placed the spotlight on an industry that has been reeling from low oil prices. Here is a look at the ripple effects in the oil sands.

Shutdowns

$65-m
Daily revenue in dollars estimated lost by companies from plant shutdowns, at peak earlier this week
1.2 m
Amount of oil in barrels a day off-line at the peak of lost production earlier this week, as estimated on Tuesday by ARC Financial Corp
48
In per cent, proportion of total production in Alberta’s oil sands that 1.2 million barrels a day represents
14 m
Total barrels of lost production, assuming a gradual ramping up of output later this month, as estimated by Goldman Sachs. Value could be as much as $760-million
11
Number of oil-sands plants that were off-line this week

Syncrude Canada Ltd. and Suncor Energy Inc. are the two largest operators, each with a capacity of 350,000 barrels a day at their main plants. With the evacuation of Fort McMurray last week, thousands of employees and their families exited. Projects such as those operated by Syncrude and Suncor relied on essential staff to carry out controlled shutdowns. Smoke became a concern in the days after the evacuation on May 3, though the operators said on the weekend that there wasn't any danger to workers on site or to the facilities.

Story continues below advertisement

The major operations, located north of Fort McMurray, have a long history in the region. Suncor opened in 1967, while Syncrude became the second oil sands facility when it opened its Mildred Lake plant in 1978. Syncrude and Suncor transform tar-like bitumen into synthetic light crude. Four of the 11 plants that shut down are located south of the city: Surmont, Long Lake, Leismer and Hangingstone.

Production impact

While precise production numbers for each project haven't been disclosed by the energy producers, ARC Financial Corp. estimates that earlier this week, there were 1.2 million barrels of oil a day that had been taken off-line. That represents 48 per cent of the daily output of 2.5 million barrels from northern Alberta's oil sands in early 2016. While there are both higher and lower estimates on the number of barrels knocked out due to the plant shutdowns, industry analysts agree that at the peak of the wildfire's impact, Alberta lost at least one million barrels a day of output.

Goldman Sachs reckons that 14 million barrels of production will be lost in May, or the equivalent of more than 650,000 barrels a day over a three-week period, assuming the plants gradually ramp up later this month. "So far, the only reported damage to oil-producing facilities has been minor damage to Nexen's Long Lake facility (production was already reduced prior to the fire)," Goldman Sachs said in a research note. The value of the lost production in May could be as much as $760-million, according to some observers.

Oil price impact

Oil prices rose initially after last week's plant shutdowns. "The reason the oil price did not gain more is because, at this point, the shut-ins are expected to be short term – that is, assuming that there continues to be no lasting damage to facilities or critical infrastructure such as power lines or pipelines," ARC Financial said in a research note. Goldman Sachs described the plant shutdowns as significant, though not enough to lift oil prices for long. Slumping oil markets since 2014 had already crimped Alberta's economic growth.

"There is an economic consequence to taking production off-line. There is forgone revenue to both companies and to the Crown," Alberta Premier Rachel Notley said. The effects will be felt beyond Alberta. A forecast released Wednesday by Bank of Nova Scotia said Canada's real gross domestic product is expected to fall by an annualized 0.5 per cent in the second quarter of 2016. "The renewed slump in non-energy exports is compounded by the falloff in crude-oil shipments due to the Fort McMurray wildfires," Scotiabank said. A report by National Bank Financial Inc. said GDP growth could bounce back in the third quarter, with worst-case scenarios now averted.

Story continues below advertisement

A huge plume of smoke from wildfires burning rises in this aerial photograph taken above Fort McMurray, Friday, May 6, 2016.

A huge plume of smoke from wildfires burning rises in this aerial photograph taken above Fort McMurray, Friday, May 6, 2016.

Darryl Dyck/Bloomberg

Getting restarted

Ms. Notley met on Tuesday with Suncor chief executive officer Steve Williams and other oil bosses to map plans to get the plants up and running. "We agree that operations will only restart when it is absolutely safe to do so," she said. Mr. Williams said there was no damage to the sites north of Fort McMurray. "Our employees are very keen to get back in," he said. "Some facilities are simply turning up the volumes now. Some will be more difficult and could be a week or two."

Highway 63, the crucial route through Fort McMurray that got cut off last week, reopened on Tuesday to traffic headed to the oil sites north of the city. That is important because it allows workers and contractors to regain access and deliver supplies. "The dislocation of oil sands employees and their families from Fort McMurray has created challenges – none of which are insurmountable, given sound planning and the resolve of Albertans," RBC Dominion Securities Inc. said in a report on Wednesday titled Phoenix Rising.

Premier Rachel Notley speaks to the media along with Suncor President and CEO Steve Williams, right, and President and CEO Canadian Association of Petroleum Producers Tim McMillan, left, at the Alberta Legislature in Edmonton, Alberta, on Tuesday, May 10, 2016. They met to discuss recovery strategies, including prioritizing restarting industrial activities, moving forward in Fort McMurray after the devastating wildfires.

Premier Rachel Notley speaks to the media along with Suncor President and CEO Steve Williams, right, and President and CEO Canadian Association of Petroleum Producers Tim McMillan, left, at the Alberta Legislature in Edmonton, Alberta, on Tuesday, May 10, 2016. They met to discuss recovery strategies, including prioritizing restarting industrial activities, moving forward in Fort McMurray after the devastating wildfires.

Amber Bracken/THE CANADIAN PRESS

Future of oil sands

It is shaping up to be a year of flat growth in production in the oil sands, given the setbacks.

"While output is expected to eventually return in line with the earlier uptrend, oil firms will never make up for the lost output during the interruption," National Bank said. There is only one major new project under construction in the oil sands: The $15-billion Fort Hills joint venture, located 90 kilometres north of Fort McMurray, is slated to open in late 2017. Fort Hills is led by Suncor, which holds a 50.8-per-cent stake. Its partners are France's Total SA and Vancouver-based Teck Resources Ltd.

Story continues below advertisement

DBRS Ltd. said there has been little to no damage to facilities from the wildfires. "DBRS considers the impact on credit profiles to be minimal," the rating agency said. In the long term, despite the cancellation of planned projects in northern Alberta during the slump in global energy markets, the oil sands are forecast to maintain a leading role in Canada's oil and gas industry. Nearly 60 per cent of the country's oil production comes from the oil sands, and the region is expected to drive future production growth, the National Energy Board said in a report released Wednesday.

It is unclear how fast or slowly the oil sands will expand in the years and decades ahead. "Oil production growth will depend on future prices and pipeline development," the NEB cautioned. Proposals that industry executives say are crucial to the oil sands' future include Enbridge Inc.'s Northern Gateway oil pipeline plans from Bruderheim, Alta., to Kitimat, B.C., and Kinder Morgan Canada's proposed expansion of its Trans Mountain oil pipeline from the Edmonton area to Burnaby, B.C. Both those proposals face opposition from environmentalists and many First Nations in British Columbia.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

Latest Videos

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies