Alberta Wildfires Sideline Oil & Gas Development

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Researched by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--An emergency declaration due to wildfires in the oil-rich Canadian province of Alberta has curtailed about 3% of the nation's total output, though the broader market implications are so far nil.

Describing the situation as "unprecedented," Alberta Premier Danielle Smith declared a state of emergency during the weekend, prompting about 250,000 people to evacuate their homes.

About 80% of the crude oil produced in Canada comes from Alberta, though the province also is a notable producer of natural gas. An estimated 280,000 barrels of oil equivalent per day (BOE/d), or roughly 3% of the nation's total capacity, are offline due to the fires.

Smith said during a recent press conference that some of the fires might continue "for several months."

Alberta's wildfire season begins March 1. As of Monday, there were 88 wildfires raging across the province, of which 25 were categorized as "out of control." Hot, dry conditions are expected to continue through the remainder of the week.

Canada is the fourth-largest crude oil producer in the world, and Alberta is home to one of the most lucrative deposits globally. It's also the primary oil exporter to the U.S.

For the four-week period ending April 28, Canada delivered an average of 3.5 million barrels per day (BBL/d) worth of crude oil to its southern neighbor, a 2.5% increase from the same period last year.

Most of the curtailments, meanwhile, were associated with pipeline infrastructure.

Broader markets, however, have been unresponsive. Crude oil prices are reacting more to concerns over a recession and the health of the U.S. banking sector. After a sharp rebound during Monday trading, West Texas Intermediate, the U.S. benchmark for the price of oil, was flirting with a 1% loss in early Tuesday trading.

Western Canadian Select, meanwhile, was up more than 3% in overnight trading as the situation unfolds.

TC Energy (NYSE:TRP) (Calgary, Alberta), formerly TransCanada, said Monday that operations on its NOVA gas transmission system were normal, though it closed three compressions stations as a precautionary measure.

"We continue to monitor the situation closely," the company said. "Our facilities are monitored 24/7 remotely and operations can be shutdown, as required."

Pembina Pipeline Corporation (NYSE:PBA) (Calgary), for its part, said it shut in a combined 443 million cubic feet per day worth of natural gas, with various pump stations and gathering systems shut down.

"To date, Pembina is not aware of any material damage to its assets," the company said. "We continue to monitor this dynamic situation closely and as soon as it is safe to do so, operators will begin accessing the other impacted sites and implementing a phased restart plan for the impacted assets."

The impact, however, is nowhere near as severe as the outbreak near the Fort McMurray area in May 2016. Hundreds of thousands of people were evacuated in wildfires that threatened the neighboring province of Saskatchewan.

Analysis at the time from the U.S. Energy Information Administration said up to 1 million BBL/d were impacted by wildfires that struck the heart of the Canadian oil industry. The impact, meanwhile, lasted through the third quarter.

Alberta turned out an average of 3.8 million BBL/d in 2020, just as the COVID-19 pandemic was under way. Provincial data show total crude oil and equivalent production should reach 4.7 million BBL/d by the early 2030s.

The province recorded an average of 10.3 billion cubic feet of natural gas production, a 7% increase from the prior year.

Total revenue for Alberta's energy exports, meanwhile, increased 67% from January to November, compared to year-ago levels, to reach about US$100 billion.

Alberta, meanwhile, is expanding its options, with the overhaul of the TransMountain oil pipeline and liquefied natural gas (LNG) developments in British Columbia offering up an Asian option for exports.

All that could be stunted somewhat by wildfires, though the province has diversified greatly since the Fort McMurray wildfires from 2016.

Alberta published an outlook on its energy sector earlier this year, saying it's proved to be an "incredibly resilient" producer that's set up for continued growth in 2023.

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