Oil companies tackle outages as production ramps up

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Oil sands production continues to tick upward, but companies in the Fort McMurray region still face a myriad of challenges, from housing and services for their displaced employees, to damage to pipelines and power lines, to the lingering fear that the region remains a tinderbox with an out-of-control fire raging not so far away.

Close-to-normal bitumen production could return in the weeks ahead, but the larger project of rebuilding a community will take much longer.

"It will be faster than anybody anticipated in being able to get things up and running again," Nancy Southern, chair, president and chief executive officer of Atco Ltd., said in an interview on Wednesday.

"It won't be the way it was. That will take years.

"But we'll be able to make do."

In the oil sands region, supply estimated at as much as 1.2 million barrels a day remains shut down – nearly half of the normal output.

That's down from 1.4 million barrels a day earlier in the week.

But it could take at least a week, and likely more, before full production is restored.

"What is important to keep in mind is that these unplanned outages should drop in the coming days as operations resume, particularly at the upgrading facilities of Syncrude and Suncor," Royal Bank of Canada analyst Greg Pardy said in a note. "Accordingly, a string of oil sands operational updates can be expected into next week."

Oil prices rallied on Wednesday, but it was not in reaction to the oil sands outages, which Alberta Premier Rachel Notley and energy executives have said could be resolved relatively shortly. Instead, markets rallied on an unexpected withdrawal from U.S. inventories in weekly data from the Energy Information Administration.

U.S. benchmark West Texas Intermediate rose $1.57 (U.S.) to $46.23 a barrel, its highest since Nov. 4. The discount on Western Canada Select heavy oil for June delivery widened by 20 cents to $12.50 a barrel under WTI, reflecting expectations of more production resuming.

The massive forest fire that burned down 2,400 homes and buildings in Fort McMurray, and forced the removal of nearly 90,000 residents, also went through two of Atco's key power transmission lines west of the city, said Siegfried Kiefer, president and chief operating officer of Canadian Utilities Ltd., an Atco company.

Speaking after Atco's annual general meeting on Wednesday, Mr. Kiefer said both those lines – one 144-kilovolt line and one 240-kilovolt line – will need to be repaired for all oil sands producers to have the power to ramp up to "full-scale" operations.

"We've had partial inspections. We need to get on the ground and get access to them. Access is very difficult up there, very muskeggy."

But he believes that portion of the power grid will be fixed in the next few weeks, well in time for oil sands producers "to meet their full energization and full production schedule."

Ms. Notley has said the movement of goods to oil sands plants has already resumed. But access to the city is limited almost exclusively to emergency personnel. Meanwhile, there is still a ban in place on oversized loads travelling on Highway 63, an official with Alberta Transportation said on Wednesday. The highway is the lone land route into and out of energy facilities north of the city.

Ms. Notley said on Tuesday that the province is also setting up a temporary medical centre in the region and working with the industry to improve access to local airspace, which is under tight restrictions.

Earlier this week, Suncor Energy Inc. CEO Steve Williams said the industry has ample capacity to accommodate returning evacuees needed to restart operations.

There is "a big capability to bring people in and out, and we have the camps in place, so people should not be a barrier to starting up," he said of his facilities north of Fort McMurray. Royal Dutch Shell PLC, for example, is flying in workers to its Albian Sands operation, where production has resumed at reduced rates.

By contrast, areas south of the city remained on high alert. Flames came within five kilometres of Athabasca Oil Corp.'s steam-driven Hangingstone plant, but the operation was spared any direct damage, according to a company spokesman. Still, the facility remains shut down, with no timeline for a restart.

Each facility faces a different set of challenges, said Tim McMillan, president of the Canadian Association of Petroleum Producers.

But there is a lingering concern about the threat from the fire that is still raging out of control east of the oil sands region. "People are absolutely thinking through that because this fire is not considered under control yet," Mr. McMillan said. "And we need to be very conscious of those [potential] changes and how they could affect the citizens again."