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Shell Canada reopens first oilsands mine shut due to Alberta wildfire

CALGARY – The first oilsands mine shut down by wildfires in the Fort McMurray region a week ago has been restarted and optimism is building that many of the largest operations will be producing again in a little as a few days.

Shell Canada said Tuesday morning that it had resumed production at its Albian Sands mining operations about 95 kilometres north of Fort McMurray after a seven-day closure.

The operations, which include the Muskeg River and Jackpine oilsands mines, have the capacity to produce 255,000 barrels of oil a day, but Shell would say only that they were initially operating at a reduced rate.

Meanwhile, in a joint news conference in Edmonton with Premier Rachel Notley on Tuesday afternoon, Suncor Energy Inc. (TSX:SU) CEO Steve Williams said some oilsands operations north of the city could be up and running in a few days, while some south and east of the city where a fire still rages will take longer.

Williams said that north of Fort McMurray operations were affected by smoke but not fire.

“And there, you’re thinking of days or maybe a week or so but not talking longer periods,” he said.

“South, where there have been a few more direct impacts from the fire, we have to go in and evaluate and then put the plans in place.”

He said pipelines appear to be intact but some of the electrical power infrastructure has been affected.

Notley said it appears there may be some damage to the Nexen Long Lake facility owned by China’s CNOOC Ltd. but it’s unclear how much.

Shell’s oilsands mines were closed to allow employees to tend to their families and to free up Shell’s work camp to accommodate some of the 80,000 people evacuated from Fort McMurray. Shell said the decision to restart was made because of improvements in air quality and weather and because the fire now is moving way from the site.

“Safe restart is important to our company and staff to allow us to contribute to the recovery efforts of the Fort McMurray area,” Zoe Yujnovich, Shell executive vice-president for oilsands, said in a statement.

Shell said it would fly staff in and out of the site to ramp up production over the coming days and weeks.

Analyst Nick Lupick of AltaCorp Capital estimated Tuesday that the shutdown of Imperial Oil Ltd.’s (TSX:IMO) Kearl oilsands mining project on Monday had increased the amount of production offline in the oilsands to just over 1.1 million barrels a day. Kearl was producing about 200,000 barrels a day of bitumen.

Four of the five oilsands mining operations in the region were shut down due to the fire. The only one that didn’t close was the Horizon mine operated by Canadian Natural Resources Ltd. (TSX:CNQ).

In a report Tuesday, commodities analyst Martin King of First Energy Capital said a decline in demand drove average Alberta gas prices down to 33 cents per thousand cubic feet on Monday, the lowest daily average price he could recall in at least 30 years.

Oilsands operations use a tremendous amount of natural gas to produce and process the bitumen and to provide power from gas-fired co-generation plants on site.

“They were already looking at weak prices from high storage in Alberta — high storage everywhere, really — and this is just, it’s not even the icing on the cake, it’s the icing on the icing on the cake in terms of bad prices,” King said in an interview.

The oilsands shutdowns have reduced demand for natural gas in Alberta by 700 million to 900 million cubic feet a day, King estimated. That’s about 25 per cent of total gas demand in the province. He said the oilsands industry normally burns about 1.5 billion cubic feet a day of natural gas.

Prices are expected to improve as oilsands projects come back online but gas producers will likely remain under pressure, King said.

Shell said it sheltered more than 2,000 evacuees between last Tuesday and Saturday but all have since left. It said more than 8,000 individuals were evacuated from its airstrip on more than 80 flights during the same period.

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