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Alberta fires set to double as companies declare force majeure

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Wildfires ravaging the center of Canada's oil patch in northern Alberta and leading more than 80,000 to flee are set to double in size over the weekend.

[ALBERTA] Wildfires ravaging the center of Canada's oil patch in northern Alberta and leading more than 80,000 to flee are set to double in size over the weekend. Suncor Energy Inc, Phillips 66 and Statoil ASA declared force majeure on supplies from the region.

There is "high potential" that the fire could double in size to 2,000 square kilometres (770 square miles), Chad Morrison, a senior wildfire manager for the Alberta government, said.

That's more than twice the area of New York city. Firefighters were on the defensive, striving to protect the communities of Gregoire Lake, Anzac and Fort McMurray First Nation. The ferocity of the fire was unprecedented, Mr Morrison said.

"This is an extreme, rare fire event, that is something that is historic for us," Mr Morrison said earlier at a press conference in Edmonton, flanked by Alberta Premier Rachel Notley and a brigadier general from Canada's military. "There is no amount of resources we are going to be able to put on this fire that can hold it."

Disruptions to oil production, the lifeblood of Alberta's economy, add to a human catastrophe as blazes razed entire neighborhoods in Fort McMurray, the gateway to the world's third-largest crude reserves.

Police and military officials were working to evacuate the remaining 10,000 residents who had gone north to work camps now considered unsafe.

As many as 25,000 of Fort McMurray's evacuated residents had gone north to oil-sands work camps before the fires overtook the town, cutting them off from the rest of the country. Police began escorting convoys of 50 vehicles at a time through the fire zone Friday morning, working to get the 10,000 people to safety in towns south of the city.

Sam Osterhagen, a welder who was working near the oil hub, spent the bulk of his 40th birthday in the convoy after lining up early in the morning. He and his coworkers were stuck for the last three nights at a campsite north of town, watching as the fires burned. It looked like an orange ball glowing in the distance, with flames a couple hundred feet high, they said.

"I didn't think I was going to make it," Mr Osterhagen said, after stopping with his buddies to grab a burger at Wally's Fast Food in Grasslands on Highway 55, about halfway from Fort McMurray to Edmonton. It had taken them seven hours to drive a distance that would normally take two.

Passing through Fort McMurray, the men could see vast swaths of burned-out forest and homes and buildings destroyed, though the downtown seemed to be intact, they said. The smoke was thick in the air and embers glowed in the burned brush along the roadside until they got well south of town, they said.

"They are dealing with an absolute beast of a fire, it's one of the worst we've ever seen," Mr Goodale said at a press conference in Toronto. "The situation is still evolving, it's still very dangerous."

The inferno around Fort McMurray may become the costliest catastrophe in the country's history with insurance losses potentially reaching C$9.4 billion (S$10 billion).

Bank of Montreal cut its second-quarter gross domestic product growth estimate to zero from 1.5 per cent, citing "severe disruptions to oil production" due to the fires. BMO said the estimate was a placeholder, dependent on receiving more information on the scope of the disaster.

The economic cost of the disaster is "unquantifiable," Mr Goodale said, but it will be "far-reaching and deep." Alberta has already set aside C$100 million to help families affected by the blaze, Ms Notley said.

Fort McMurray, which was once a bustling hub of activity for oil and gas workers, now sits empty and will not be safe for a long time, she said.

"The wildfire situation is still volatile and sudden road closures are still possible," Alberta's emergency management authority said on its website. New fires were still starting and high winds threatened to keep stoking the blaze, creating even more work for responders battling the wildfire.

Environment Canada said temperatures would rise to 27 degrees Celsius (80 degrees Fahrenheit) on Saturday, with a 40 per cent chance of rain on Sunday and Monday, followed by cooler temperatures.

The wildfire is the latest blow to a province already grappling with the economic toll of a two-year oil price slump in one of the world's most expensive places to extract crude.

More than 40,000 energy jobs have been lost in Canada since the price crash began in 2014, pushing the provincial economy into recession.

Royal Bank of Canada estimated that as much as 1 million barrels a day of production was shut because of the blaze, or about 40 per cent of oil sands output, as companies including Suncor, Cnooc Ltd's Nexen, Royal Dutch Shell Plc, and ConocoPhillips reduce production and open work camps to residents escaping blazes in the Alberta's biggest-ever evacuation. Inter Pipeline Ltd shut part of its system in the province. The disruptions pushed up the price of oil sands crude.

Suncor said it issued various notifications of force majeure - a provision protecting companies from liability for contracts that go unfulfilled for reasons beyond their control - to customers, service providers and other third-party contracts that will be affected by reduced or stopped operations in the region.

Phillips 66 declared force majeure after cutting production in response to the fires, a person familiar with the matter said, asking not to be named because the information isn't public.

Officials were assessing the status of Cnooc's Long Lake facility, which is threatened by the blazes. Statoil said it declared force majeure on production after curtailing supplies from its Leismer facility. Cenovus Energy Inc said it was evacuating non-essential staff.

Major oil-sands sites are near Fort McMurray and are concentrated to the north while the fire is to the south. Fire danger to their operations is likely to be minimal. Most of Alberta's oil and gas facilities have their own fire-fighting crews and have physical defenses against wildfires, such as gravel fields and fire breaks, Mr Morrison said.

There were a total of 40 fires burning, down from 49 Thursday, with five considered "out of control," according to government estimates. More than 1,200 firefighters, approximately 110 helicopters, and 27 air tankers are fighting the fires.

BLOOMBERG