Ranging fire is engulfing the Alberta oil patch.”Fort McMurray’s more than 80,000 residents have been ordered to flee the oilsands city after a massive wildfire, fuelled by soaring temperatures and tinder-dry forest, broached the city limits.”Says the National Post
As if things weren’t bad enough for the oil sector going up in smoke. This will leave residents homeless and without a job. As Zero Hedge reports. ” It took the market over a day to appreciate the fallout from the devastating Canadian wildfire which has led to a state of emergency in Alberta, the evacuation of over 80,000 people in the oilsands gateway city of Fort McMurray, and the destruction of over 1,600 structure. According to insurance inudstry reports, losses from the fire are approaching $1 billion, and will likely set records for the country.”
And not only will this affect everything Calgarians are already having to endure over the falling oil prices leading to mass unemployment and falling housing prices. But the Alberta and Federal government may well have to come to the rescue financially. As Zero Hege continues :
“The average cost of a single-family home in the community was recently around CAD$627,000 ($487,000), Aon said, citing data from the local real estate industry, and cited by CNBC. That would suggest losses of CAD$1 billion ($779 million), with more to come as the fire continues to blaze out of control. Such damages would already make the fire the third-costliest insured loss event in Canadian history, the firm said.
And now that Canada has had a chance to evaluate the damage from the historic fire, the question on everyone’s lips is what will be the near-term impact on oil production as a result of the fire. While initially producers located in the area denied they would be forced to reduce production, this has changed over the past 24 hours.
“As more information comes in, it appears that the impact on production of the wildfires in Alberta will be significant,” said analysts at JBC Energy in Austria. Analysts noted that Shell shut its Albian Sands mine and Suncor SU, -2.20% shut its base plant, while producers Syncrude Canada and Connacher Oil & also reduced output in the region.
“Taken together this amounts to some 0.5 million b/d of capacity that is currently offline. Infrastructure is being affected too, with the 560,000 b/d Corridor pipeline shut down and movement along the 140,000 b/d Polaris pipeline significantly curtailed. On top of that, trains are not operating near Fort McMurray, according to the Canadian National Railway,” said the analysts.
But the most comprehensive answer so far comes from Morgan Stanley’s Benny Wong who estimates that the total number of offline capacity will be anywhere between 400 and 500 mbbl/d, with the shut-in expected to last about 10 days, potentially reducing total market output by as much as 5 million barrels.”
It sometimes just goes from bad to worse. You gotta feel for our fellow Canadians. They may start immigrating nearby. Let’s welcome them. WE too may face dangers ahead!
Richard Paul
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