Alberta government imposes oil production cuts for province

Alberta cutting back oil production

Alberta Premier Rachel Notley and her cabinet have put the legal wheels in motion to begin cutting oil production.

The market price for Alberta oil is rebounding today, a day after Premier Rachel Notley announced plans to cut production by nearly nine per cent in January to deal with a glut of oil that can't be moved to buyers, but the discount Canadian producers have to stomach compared to the price their US counterparts get is still north of $30 a barrel. The move is meant to combat steep discounts now placed on Alberta oil. Executives of upstream oil companies such as Cenovus Energy and Canadian Natural Resources have urged Notley to intervene for weeks, saying they couldn't transfer the oil they were producing without sufficient pipeline space, leading to hundreds of thousands of barrels clogging up warehouses and being sold at a discount to the USA benchmark Western Texas Intermediate.

The cuts will affect about 25 larger bitumen and conventional producers in Alberta.

The Alberta government also expects to buy locomotives and rail cars by that date to transport 120,000 barrels a day. Companies that produce less than 10,000 barrels a day will not be affected by the daily cuts. Once this happens, the cut will be reduced to 95,000 bpd, to remain in place until the end of next year.

"We're facing, I think, something that qualifies as a crisis, or very almost that, and there are no other tools available to the provincial government so given that the market or even coalition of players in the market can't do this on their own without running afoul of price fixing laws, this is something that makes a lot of sense for all of the parties but I give full credit, not just to the fact that they are agreeing on this, but that they're saying that they don't want this to be about partisan politics and they want it to be about the interests of Alberta and I have no question that Albertans want to see more of that kind of collaboration", she said.

Notley has already taken some steps to try to help producers ship more oil to market while the industry awaits the construction of more pipelines. Suncor's operations include oil sands development and upgrading, offshore oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand. We need them to toss the half-hearted statements away, we don't actually need Ottawa's sympathy, we need Ottawa's full attention. "They had an opportunity early to do something and they didn't", said Mandel.

"At the end of the day, this isn't just about Alberta, this a national priority".

Kenney said that not all of Saskatchewan's oil production would be affected. "It does not face the same differentials".

Notley told reporters at her announcement that it doesn't matter the size of the oil company, producers big and small will be affected.

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