In this October 25, 2009 file photo, workers leave the Suncor oil sands extraction facility near the town of Fort McMurray in Alberta Province, Canada.MARK RALSTON/AFP / Getty Images
ConocoPhillips Co. said it has restarted production at its Surmont oil sands plant, the latest producer to revive output as risks from wildfires subside.
The company said on Tuesday there had been very minor damage at the site with no impact to ongoing operations. No timeline was given, but production is expected to gradually climb to pre-fire levels of roughly 30,000 barrels per day net to the company.
The move follows similar announcements from Suncor Energy Inc. and Imperial Oil Ltd., as major producers begin the slow process of resuming operations idled due to fires.
More than a million barrels per day of production was estimated to be shut down as fires erupted in Northern Alberta last month, forcing companies into emergency mode and prompting successive evacuations from the city and work camps threatened by the blaze.
A spate of sudden outages, in the oil sands and elsewhere, have helped push U.S. and global crude prices above $50 (U.S.) a barrel in recent weeks, accelerating a market re-balancing that was already under way as growth in U.S. shale production declined. Demand has also picked up, which has further supported prices, said Judith Dwarkin, chief energy economist at RS Energy Group in Calgary.
"The latest spate of international outages are taking place against the backdrop of a global market amply over-supplied with crude, but re-balancing thanks to ongoing demand growth and a price-driven contraction in non-OPEC production that is finally underway," she said Tuesday.
On Monday, Suncor cut its production outlook for the year and said it will take until the end of June to restore full output at its oil sands operations. The company said Syncrude Canada Ltd. production will restart in late June, with a full ramp-up not expected until mid-July following the completion of scheduled maintenance work.
Syncrude spokesman Will Gibson said in an e-mail the company now has 'several thousand workers in place working on safely restarting our operations in the region."
Meanwhile, its Edmonton refinery is projected to return to full service by the end of week following a partial outage that led to fuel shortages in Western Canada.
Oil sands producers are slowly ramping up production after closing plants in early May as wildfires roared into Fort McMurray, Alta., forcing the mass evacuation of the isolated city. Residents began a staged return to the fire-scarred city last week, and services are slowly being restored.
Imperial Oil Ltd. has also resumed normal operations at its Kearl bitumen mine, it said last week.
As a result of the fires, Suncor said it now expects oil sands production for the year to be between 375,000 to 395,000 barrels per day, down from 400,000 to 425,000 barrels expected in April. Expected sales of synthetic oil are pegged at 265,000 to 275,000 barrels per day from 290,000 to 315,000 barrels, it said.
Total 2016 production is projected to drop to 585,000 to 620,000 barrels of oil equivalent per day, from 620,000 to 665,000 barrels expected previously. The company expects lower full-year production from its larger Syncrude stake.
Suncor reiterated there is no damage to its assets and said it anticipates operating costs in line with previous assumptions of $27 to $30 a barrel. Costs at Syncrude are expected to climb to $41 to $44 per barrel for the full year.
"Overall, we estimate that Suncor's 2016 output has been reduced by [21 million barrels, 14 million in the base oil sands operations and 7 million at Syncrude] and has an estimated impact on Cash Flow of roughly $700-million," Nicholas Lupick, analyst with Altacorp Capital Inc., said in a research note Tuesday.
"After accounting for the current (estimated 2 week) outage being experienced at the Edmonton refinery's unit (which limits the facility's gasoline output) our Q2/16 cash flow has been reduced by roughly $800-million."
Raymond James analyst Chris Cox said in a note that, with the turnaround at Syncrude scheduled for mid-July, "a full return to pre-fire operations will likely be delayed, although we do not see a meaningful risk to operations performance as a result of the fires and expect that prolonged downtime at Syncrude could support [crude] prices in the near-term, potentially supporting margins at the company's operated oil sands assets."
Last month, RBC analyst Greg Pardy pegged the wildfire-related hit to Suncor's cash flow at $928-million.
Clarification: This article has been amended from an earlier version to reflect updated production figures.
Bertrand Marotte