Alberta government eases oil production curtailment

The province introduced mandatory production cuts to reduce the inventory and improve the price of oil

The Alberta government is increasing the amount of oil production allowed by the province’s producers.

It said production limits in May will increase by 25,000 barrels a day and 25,000 more in June – a 50,000 increase in total to 3.71 million barrels per day allowed, effective June 1. This represents a total increase of 150,000 barrels a day since the start of the production limit policy on Jan. 1, the province said.

Rachel Notley
Rachel Notley

“As we increase production, we’re providing even more certainty for producers who have been working with us to protect the jobs and livelihoods of thousands of Alberta families and businesses. This temporary policy has been critical to reducing the oil price differential while we move ahead with our medium-term plan to ship more oil by rail and lead the long-term charge for new pipelines as we fight to get full value for the resources owned by all Albertans,” said Premier Rachel Notley in a statement.

Recently, Calgary-based energy giant Imperial announced  it has slowed the pace of development of its Aspen in situ oil sands project given market uncertainty stemming from Alberta government intervention and other industry competitiveness challenges.

“This was a difficult choice in light of our final investment decision on Aspen announced last November,” said Rich Kruger, chairman, president and chief executive officer of Imperial, in a news release. “However, we cannot invest billions of dollars on behalf of our shareholders given the uncertainty in the current business environment. That said, our goal is to ensure the work we do this year will enable us to effectively and efficiently resume planned activity levels when the time is right.

“The decision to return to planned project activity levels will depend on factors such as any subsequent government actions related to curtailment and our confidence in general market conditions.”

The government introduced mandatory oil production cuts in an effort to reduce the inventory of oil and thus improve the price.

“Imperial’s view remains that free markets work and intervention sends a negative message to investors about doing business in Alberta and Canada. The company remains concerned about the unintended consequences of the government’s decision to manipulate prices, including the negative impact on rail economics,” the company said.

The provincial government said increasing production limits in May and June will help the province match production levels to what can be shipped using existing pipeline and rail capacity, while also addressing excess storage. The province’s crude-by-rail program is scheduled to begin initial shipments in July, ramping up to 120,000 barrel-a-day shipments by 2020.

It said the first 10,000 barrels per day a company produces remains exempt from any production limits, meaning only 28 of more than 300 producers in Alberta are subject to the production limits.

– Mario Toneguzzi for Calgary’s Business


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