Macro

Wildfires Encircle Canada’s Oil-Sands City, Suncor Cuts Production

Wildfires near Fort McMurray threaten oil production, Suncor cuts output at 231,000-barrel-a-day Firebag site.

By Mackenzie Crow

7/11, 13:09 EDT
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Key Takeaway

  • Wildfires near Fort McMurray, Alberta, have led Suncor Energy Inc. to curtail production at its 231,000-barrel-a-day Firebag oil-sands site.
  • Despite the flareup, Alberta's wildfire season is milder than last year with 690 fires and 183,000 hectares burned so far in 2024.
  • Natural gas output is also threatened with fires within 10 kilometers of sites producing the equivalent of about 30,000 barrels a day.

Wildfires Threaten Canadian Oil Sands

A series of wildfires have erupted around Fort McMurray, Canada's unofficial oil-sands capital, posing significant threats to crude production from the world's third-largest petroleum reserves. Alberta Wildfire data indicates that eight out-of-control blazes have been discovered just south and southwest of the city since Wednesday, adding to the three already burning to the north, where the region's main oil-sands mines are located. The fires have prompted Suncor Energy Inc. to curtail production from its 231,000-barrel-a-day Firebag oil-sands site.

Fort McMurray, a city of approximately 70,000 people, was previously devastated by a blaze in 2016 that forced thousands to evacuate and temporarily shut down more than 1 million barrels of daily oil output. The city faced a partial evacuation in May due to an approaching wildfire. Despite the recent flare-up, Alberta is experiencing a milder wildfire season compared to last year's record-breaking onslaught. The province has seen 690 fires this year, compared to 840 at this point in 2023, with about 183,000 hectares affected so far in 2024, less than a tenth of the total area burned by this time last year.

Heatwave Impacts European Refineries

Europe is grappling with searing heat that is nearing levels at which some oil refineries may have to reduce fuel production. Greece is battling wildfires, and temperatures in the nation's capital could exceed 40C (104F) in the coming weeks. In Poland, heat may soon surpass the threshold at which the country's top fuel supplier can operate its refineries normally. Macquarie Group estimates that heat-related disruptions at European plants reached about 1 million barrels-a-day last year, nearly 10% of their normal capacity.

"European refineries were designed in the sixties and the seventies," said Alan Gelder, vice president of refining, chemicals, and oil markets at consultancy Wood Mackenzie Ltd. "The world’s got hotter since then." The industry is adapting by adding equipment where economically feasible to maintain profitability. Plants in regions accustomed to hot weather, like the Middle East, are better designed to cope, whereas European refineries were built to withstand lower temperatures.

Global Refinery Challenges

The heatwave is not limited to Europe; US refineries, particularly on the East Coast and Midwest, are also facing challenges. These operations are designed to handle winter's cold rather than summer's heat. Randy Hurburun, head of refining at Energy Aspects Ltd., noted that high temperatures can degrade performance, forcing refineries to reduce run rates. Last summer, Valero Energy Corp.'s McKee, Texas, refinery experienced an unplanned shutdown of its key gasoline-making fluid catalytic cracker due to intense heat.

US refiners are already operating near full capacity as demand for gasoline peaks during the summer driving season. Much of the winter and spring maintenance was aimed at ensuring fewer breakdowns during extended periods of summer heat. However, prolonged high temperatures can overload regional power grids, leading to sudden shutdowns of entire plants.