Sask. won't follow Alberta with cut to oil production

06 December, 2018, 20:45 | Author: Mary Valdez
  • Alberta premier announces 8.7 per cent oil production cut to increase prices

This past weekend Premier Rachel Notley took the advice of several knowledgeable energy industry leaders and announced the "curtailment" of some of Alberta's oil production as an effort to reduce the unacceptable oil price differential.

The discount between Western Canadian Select bitumen-blend oil and New York-traded West Texas Intermediate varied between US$19.75 per barrel and US$22.25 on Monday, an improvement over Friday's US$28.50 settlement price, according to Net Energy.

Western Canada Select (WCS), the benchmark for heavy oil in Alberta, continues to trade below $15 per barrel, or roughly $40-per-barrel lower than WTI.

In an announcement Sunday evening, Notley said the daily cuts will remain in place until the 35 million barrels of processed oil now in storage is shipped to market, likely by the spring.

Alberta's government on Sunday announced a 325,000 barrel per day production cut due to massive bottlenecks in pipelines heading to the United States. As the excess storage clears, the reduction is expected to drop to 95,000 barrels a day until the end of next December. For these reasons, a government-mandated production cut in Saskatchewan could result in a loss of jobs and economic activity in our province, but would have little impact on the price of oil because it would disproportionately impact conventional oil production, which is not the problem.

Canada's ambassador to the United States says he has done some pre-emptive diplomacy with the Trump administration on Alberta's plans to force output cuts on its oil industry.

"Our oil production and market for our product is significantly different than Alberta's". She earlier stressed that now Alberta's resources are given away "for next to nothing", referring to the province's crude selling for around $15 a barrel.

Fagerheim said there are key differences between oil in the two provinces that means a similar initiative in Saskatchewan wouldn't do much. Companies like Cenovus Energy Inc and Canadian Natural Resources Ltd are vocal supporters of the move, with Cenovus saying the move will help it maintain capital spending to prepare it to move more oil when more pipelines are available in 2020.

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Sohi said he shares Alberta's frustration about the oil-price crisis and has asked the NEB to report as soon as possible. Storing oil in them would make more sense. While curtailments have been used before by previous governments, we believe they should only be used for a short period of time, and only in extreme cases.

That figure is expected to shrink as the glut of oil in storage is reduced.

Please understand the differential will always exist until we have enough pipeline capacity to get our products to Canadian and world markets.

If there is a cut back, he says, gasoline prices will inch up.

But the president could take action if he becomes concerned with climbing prices, Mar said. The province estimates 25 producers will have to impose cuts.

Opposed to the cuts, Suncor says authorities should let the market regulate itself. "The fact is, our government inherited a flawed system that led to projects going before the courts rather than getting shovels in the ground".

Saskatchewan still made much of the differential during its mid-year financial update last week, when Finance Minister Donna Harpauer said "absolutely it's a concern." .

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