Oil sands fared well through Canada fire, but restart a challenge

Sun May 8, 2016 10:20pm EDT
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By Jessica Resnick-Ault and Liz Hampton

NEW YORK/CONKLIN, Alberta May 8 (Reuters) - The mass evacuation of residents from the wildfire-devastated Canadian oil town of Fort McMurray is likely to significantly delay the restart of production, even though energy facilities themselves have escaped major damage from the flames.

The huge wildfire that entered its second week on Sunday has destroyed entire neighborhoods in the town, forcing nearly 100,000 people to flee.

Even though Canadian officials on Sunday showed some optimism that they were beginning to get on top of the wildfire, oil prices jumped in early Asian trading on concerns over the loss of production capacity caused by the fire -- equivalent to around half of the country's oil sands production.

Energy facilities were barely touched through the first week of Alberta's devastating wildfire, protected by fire breaks, other defenses and provincial firefighting crews.

But thousands of evacuees -- many of whom are essential oil industry workers -- are camped out in nearby towns and stand little chance of returning soon, even if their homes are intact. The city's gas has been turned off, its power grid is damaged, and the water is undrinkable.

"It's the human element," said Mark Routt, chief economist for the Americas at KBC Advanced Technologies in Houston.

"When you have an operator and his family needs to be evacuated, the plant may be in good shape, but what is the operator going to do? Humans have to operate the plant, too."

Routt estimated that production will be shut for two to three weeks, minimum. And if fires do pass through major oil operations, he said, a restart could take months:   Continued...