Oilsands production restarts cautiously as Fort McMurray fire weakens

Market participants are closely watching on Wednesday for the prospect of further restarts by Canadian oilsands producers near wildfire-ravaged Fort McMurray as some companies began slowly bringing operations back online.

Top provincial and industry officials on Tuesday said production in much of the region should ramp up soon. Facilities north of the one-time Alberta boomtown that had been shuttered largely because of heavy smoke rather than fire were likely to come back on line first, in a matter of days in many cases.

• Oilsands operations shut down as fire threatens output
• Oilsands output cut in half by Fort McMurray wildfire

Roughly 1 million barrels per day (bpd) of output has been lost to the fire, about half of the oilsands' usual daily production, as producers and pipeline operators curbed activities and moved workers out of harm's way. The wildfire, which has spread over 229,000 hectares, is still burning, though favourable weather overnight was seen helping firefighters.

"Good progress is expected to continue with the cooler weather," Alberta wildfire information officer Travis Fairweather said. The fire moved south and east for much of Tuesday, shifting away from the area's largest oil production facilities and into sparsely populated areas.

A handful of smaller facilities remained under fire threat, however, and some could not yet be reached for damage assessments. Royal Dutch Shell Plc became the first company to resume its operation in the center of Canada's oilsands region. The company restarted its Albian Sands mines at a reduced rate and would use fly-in staff to ramp up operations, it said on Monday.

• Oil executives looks forward to restarts

The facility can produce up to 255,000 bpd. Syncrude, controlled by Suncor Energy Inc, restarted power generation at its oil sands mine in Aurora, north of the city, on Tuesday as it began planning to resume operations. The site has a total capacity of around 315,000 bpd.

The oilsands role in the world oil supply is not insignificant. "The oilsands is an incredibly big deal on the global stage, it is slightly over 2.3 million barrels per day," IHSGroup director Kevin Birn said in an interview with CBC News. "Abig chunk of that goes into the upper midwest and allows consumer in Chicago and Minnesota to drive around."

But even as oil producers began to plan for the return of workers, the roughly 88,000 residents who last week hurriedly evacuated from Fort McMurray grappled with the reality that they would not be able to return to their homes for weeks. Travel to the city remains restricted to essential services, including commercial vehicles carrying equipment and supplies for oil sand operations, though not workers.

This could create more delays for the producers, as the specialists who run the oil production sites are also among the residents displaced by the blaze and they may need to be flown in to the projects.