Why is fire-threatened Fort McMurray so important to Canada’s oil industry? – 05/15/2024 at 9:02 p.m.

Why is fire-threatened Fort McMurray so important to Canada’s oil industry? – 05/15/2024 at 9:02 p.m.
Why is fire-threatened Fort McMurray so important to Canada’s oil industry? – 05/15/2024 at 9:02 p.m.

((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto)) by Nia Williams

A wildfire threatening Canada’s oilsands hub of Fort McMurray has prompted thousands of people to evacuate the isolated northern Alberta town, rekindling memories of a destructive fire eight years ago.

On Wednesday, authorities said favorable winds were expected to keep the fire away from the city, but oil market participants were closely monitoring developments. So far, no companies have reported any impact to their operations as a result of the fire or evacuation orders.

The 2016 fires destroyed large parts of Fort McMurray and disrupted more than 1 million barrels per day (bpd) of crude production.

Canada is the world’s fourth largest oil producer. Here’s why Fort McMurray is so important:

THE LOCATION

This city of about 70,000 people is surrounded by the boreal forest and is about 400 km (250 miles) north of Edmonton. It is the only major urban center in the oil sands region. The largest projects are mostly just north of Fort McMurray, Suncor Energy’s base plant

SU.TO and its majority-owned Syncrude project are both within 50 km (30 miles) of the city. Suncor said in a statement Tuesday that many of its employees were affected by the wildfires.

Further north, other significant sites include Canadian Natural Resources Ltd’s Horizon upgrader

CNQ.TO and Imperial Oil’s Kearl mine IMO.TO.

Canadian Natural Resources said Wednesday it was closely monitoring the situation and would provide necessary support to employees and their families in evacuation areas. Imperial did not immediately respond to requests for comment.

Many oil companies are flying remote workers in and out of the Fort McMurray airport.

PRODUCTION

The oil sands hold the third-largest crude reserves in the world and produce 3.3 million bpd, or about two-thirds of Canada’s total production. The oil sands industry represents approximately 3% of the Canadian economy.

Companies extract the thick, tar-like oil by mining or vaporizing bitumen deposits, which allows it to be processed into light synthetic crude oil or blended into heavy, sour crude.

MARKET REACTION

U.S. benchmark West Texas Intermediate (WTI) and Canadian heavy oil benchmark Western Canada Select (WCS) were both supported by fears that wildfires could reduce oil production. O/R CRU/CA

The WCS discount strengthened by about $1 in morning trading Wednesday to $11.60 a barrel below WTI, according to a broker.

WORKFORCE

Oil sands companies draw a significant percentage of their workforce from Fort McMurray.

Mining, quarrying, and oil and gas extraction are the major industries in the Fort McMurray region. They employ 13,200 people, or 32% of the local workforce, according to a 2021 workforce study by the Regional Municipality of Wood Buffalo, of which Fort McMurray is a part.

In addition, 22,500 people are part of the “ghost population” of industry workers, that is, workers who live elsewhere but fly to work on oil sands projects and live in camps.

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