Fort McMurray Wildfire Put $1B Hole In Oilsands Development Spending

Alberta’s chief energy economist says the wildfires that swept through Fort McMurray resulted in the loss of $1 billion in planned capital spending in the oilsands industry for 2016.

Matt Foss adds while he believes those plans, mainly for expansion or enhancements of existing projects, are deferred, not cancelled, he doesn’t know when or if companies will resume their spending given benchmark oil prices that remain below break-even levels. He said the interruptions have dropped expected oilsands spending in the current year to $18.5 billion from $19.5 billion estimated in the province’s spring budget.

In a speech at a well-attended oil conference , Foss said lower costs have reduced the West Texas Intermediate price at which oilsands expansion projects make money by about $10 per barrel to US$50 to $60 per barrel, but that’s still higher than current prices in the mid-$40s.

“The majority of them were enhancements to existing projects,” he told reporters at the conference in Calgary. “It interrupted the logistics chain for them such that their ability to deploy workforce … over those months was no longer available and then the rebuilding efforts around Fort McMurray has them just hitting pause for the moment. Hopefully, they will resume here later this year or early next year.”

Saskatchewan continues to be an industry defender, the province’s energy minister said, despite a Husky pipeline oil spill that leaked 250,000 litres of oil in the North Saskatchewan River in July.

“We’ll learn from it,” Dustin Duncan said Wednesday. “We, like you, have made the safe and responsible transport of oil a priority and we’ll learn from this event to continue to improve the high safety standards the people of Canada have come to expect. But make no mistake, in Saskatchewan we’ll continue to be defenders of this industry and the jobs that it produces. We’ll continue to defend the responsible, safe expansion of pipelines to ensure that we can sustain economic momentum and the benefits that it provides to the people of our province and to the people of this country.”

Oilsands analyst Michael Dunn of FirstEnergy Capital said the wildfires affected progress on major oilsands projects under development, for example, Suncor Energy’s Fort Hills oilsands mine, yet he expects any capital spending decrease to be a deferral, not a cancelation, in those cases. Alberta oilsands production in May dropped by around one million barrels for each day (bpd) , and by around 700,000 bpd in June. At full limit, Canada’s oilsands industry produces around 2.5 million bpd.

One of Alberta’s oldest thermal oilsands projects was involuntary to closed down amid the wildfires and has not reopened. Authorities at Japan Canada Oil Sands say their Hangingstone project will stay shut until benchmark oil costs enhance to above $50 US per barrel.