Canadian oil sands threated as wildfire season gets underway

Quantum Commodity Intelligence – Oil production at Canada's vast oil sands in the Alberta province is under threat for a second consecutive year as wildfires take hold in one of the world's largest oil-producing regions.

According to Canada's The Weather Network, multiple fires have broken out across Western Canada over the past few days, impacting Alberta and neighbouring British Columbia.

This included a major fire threatening the oil sands heartland around the city of Fort McMurray in Alberta, with the government issuing a warning for residents of nearby Saprae Creek to prepare for evacuation.

In 2023, almost 400,000 bpd of heavy crude production was shut in, while in 2016, around 1 million bpd was out of action at the peak of the wildfire season.

Production from the oil sands topped 3.2 million bpd in 2023, while output is forecast to grow to 3.7 million by the end of the decade.

Alberta will also supply heavy crude for the Trans Mountain Expansion (TMX) pipeline with first exports scheduled to start from Canada's Pacific coast in early May, although its unclear if wildfires will impact initial export volumes.

Heavy crude is already facing a crunch as OPEC+ keeps a lid on output, while reduced exports from Mexico and likely Venezuela have also impacted supply.

According to The Weather Network, there are more than 120 active wildfires in western Canada, but most are classified as 'holdover' fires still smouldering from the previous season.

In 2023, oil sands production was impacted from early May, with some fields disrupted until well into June.

According to an update from Alberta officials, there have been 12 wildfires in the Fort McMurray Forest Area since the start of the year. They have all been extinguished except for two, described as "out of control".