Latest evacuations plunge oil sands restarts into uncertainty

By Nia Williams

CALGARY, Alberta, May 18 (Reuters) - The sudden surge north of the massive wildfire burning in Canada's oil sands region has dealt a new setback to producers, triggering a second round of evacuations and threatening work camps north of Fort McMurray.

With (Other OTC: WWTH - news) the the city of Fort McMurray off limits and fewer places to house workers needed to restart operations, production may be shut down for longer than companies and market analysts had anticipated.

A shift in winds and hot temperatures sent the blaze roaring toward Suncor Energy (Toronto: SU.TO - news) and Syncrude Canada's mining and upgrading projects late Monday, forcing them to shut down for the second time in two weeks.

It (Other OTC: ITGL - news) also prompted the hasty evacuation of 8,000 oil sands workers from a dozen nearby camps, engulfed one 665-room lodge in flames and threatened other camps, emergency officials said.

Scores of work camps scattered across the remote region house thousands of people who fly in from around the country.

"We have got our fingers crossed because without the camps there's nowhere for any workers to go," said Ian Robb, president of the Unite Here Local 47 union, which represents camp cooks and cleaners.

"If the camps are not standing, there's no rebuilding."

Suncor's base plant and Syncrude alone account for about 665,000 barrels per day of oil sands crude production, and both were in the process of bringing back workers and restarting operations after the first round of shutdowns.

Analysts said a return to normal operations likely would take at least two weeks after it is deemed safe for staff to return to sites. And all that depends on the still out-of-control fire.

"We were hearing like everyone else that companies were getting staff back on location and warming things up, and now it's evacuation again. We don't know how long this will last," said Rob Bedin, engineering analyst at RS Energy Group in Calgary.

A dozen oil sands producers shuttered output as a precaution two weeks ago as the fire forced Fort McMurray's 90,000 residents to flee and destroyed nearly 15 percent of the city's structures.

The loss of 1 million barrels per day output from the oil sands, the world's third largest crude reserves, accounts for roughly a quarter of Canada's total production.

"We're probably talking until the start of June to look at some bigger scale restarts at these projects," said FirstEnergy Capital (Other OTC: CGHC - news) analyst Martin King. "It's basically a month of outages."

Spokeswoman Sneh Seetal said it was too soon to say when Suncor would be able to return to normal.

Last week, oil industry executives confidently predicted some facilities would restart operations "within days." But, so far, only Shell Canada's Albian Sands project and Statoil ASA (LSE: 0M2Z.L - news) 's Leismer facility have managed to return, at reduced rates.

Several firms had plans to begin air commutes for workers, relying on the fly-in-fly-out (FIFO) system common in the area to get workers to remote sites.

At that time, the main fire risk was seen to the south of Fort McMurray, which has smaller thermal projects. The wildfire's rapid charge north toward the largest projects in the region has changed the picture.

Air quality concerns also are holding up repair efforts. The Alberta government said on Wednesday it plans to start phased re-entry to Fort McMurray on June 1, as long as safety conditions are met.

Ongoing disruption to critical energy infrastructure also is likely to slow the return to normal.

The 355,000 hectare blaze got within 1 kilometre of Enbridge (Dusseldorf: EN3.DU - news) Inc's Cheecham terminal on Monday and prompted Inter Pipeline to partially shut down a key diluent pipeline to the oil sands on Tuesday, the second time since the fire began on May 1. The pipeline returned to full operations, again, on Wednesday. (Reporting by Nia Williams; Editing by Lisa Girion)