dirtsniffer
12-02-2018, 07:49 PM
https://www.cbc.ca/news/canada/edmonton/alberta-premier-oil-differential-announcement-1.4929610
The decrease of 325,000 barrels per day starts on Jan. 1, 2019
Alberta Premier Rachel Notley has announced a temporary 8.7 per cent oil production cut, or decrease of 325,000 barrels a day, in the production of raw crude oil and bitumen starting Jan. 1, 2019.
In an announcement Sunday evening, Notley said the daily cuts will remain in place until the 35 million barrels of processed oil currently in storage is shipped to market, likely by the spring.
The reduction will drop to an average of 95,000 barrels a day until curtailment ends at the end of 2019, when Enbridge's new Line 3 pipeline starts operating.
The Alberta government also expects to acquire locomotives and rail cars by that date to transport 120,000 barrels a day.
Smaller companies not affected
The cuts will affect about 25 larger bitumen and conventional producers. Larger producers will see their first 10,000 barrels exempted each day. Companies that produce less than 10,000 barrels a day will not be affected by the daily cuts.
Notley's announcement is aimed at addressing the difference in the price of Western Canadian Select oil relative to the benchmark West Texas Intermediate (WTI). That gap hit around $50 in late October due to a lack of pipeline capacity to get Alberta oil to market.
The government estimates Alberta is losing $80 million a day due to this discount. The measures are expected to narrow the gap by $4 US a barrel and contribute an additional $1.1 billion to the Alberta treasury this year.
The government says it believes industry will not voluntarily make these cuts after sending three envoys to talk to small and large producers.
Alberta's energy minister has power under existing legislation to set the curtailment amounts through a monthly ministerial order.
Jason Kenney, leader of the United Conservative Party, Alberta's official opposition, will provide reaction later on Sunday.
Kenney's news conference will be carried live on Facebook.
Any change in the price of oil has profound effects on Alberta's resource-dependent economy.
'Fire-sale prices'
Notley has faced pressure to take action, particularly in light of a Federal Court of Canada ruling in August that halted construction on the Trans Mountain Pipeline expansion to the west coast.
The so-called price differential started its sharp increase in September, rising to as much as $47 US a barrel in the last 10 days of October.
The gap was $28.50 US a barrel when markets closed on Friday.
The problem is caused by overproduction and a lack of pipeline capacity to get oil to market, according to the Alberta government. Notley said in an op-ed piece this week that there are 35 million barrels of oil selling at what she called "fire-sale prices."
A production cut was first proposed by the Alberta Party on Nov. 17. Kenney initially called for voluntary curbs on production by the industry, but changed his mind and proposed a 10 per cent cut last week.
On Friday, Notley used the op-ed to lay out the pros and cons of an industry-wide production cut.
Allowing the status quo to continue won't hurt producers that also have refinery operations, but it will hurt smaller companies, leading to bankruptcies and job losses, she wrote.
The decrease of 325,000 barrels per day starts on Jan. 1, 2019
Alberta Premier Rachel Notley has announced a temporary 8.7 per cent oil production cut, or decrease of 325,000 barrels a day, in the production of raw crude oil and bitumen starting Jan. 1, 2019.
In an announcement Sunday evening, Notley said the daily cuts will remain in place until the 35 million barrels of processed oil currently in storage is shipped to market, likely by the spring.
The reduction will drop to an average of 95,000 barrels a day until curtailment ends at the end of 2019, when Enbridge's new Line 3 pipeline starts operating.
The Alberta government also expects to acquire locomotives and rail cars by that date to transport 120,000 barrels a day.
Smaller companies not affected
The cuts will affect about 25 larger bitumen and conventional producers. Larger producers will see their first 10,000 barrels exempted each day. Companies that produce less than 10,000 barrels a day will not be affected by the daily cuts.
Notley's announcement is aimed at addressing the difference in the price of Western Canadian Select oil relative to the benchmark West Texas Intermediate (WTI). That gap hit around $50 in late October due to a lack of pipeline capacity to get Alberta oil to market.
The government estimates Alberta is losing $80 million a day due to this discount. The measures are expected to narrow the gap by $4 US a barrel and contribute an additional $1.1 billion to the Alberta treasury this year.
The government says it believes industry will not voluntarily make these cuts after sending three envoys to talk to small and large producers.
Alberta's energy minister has power under existing legislation to set the curtailment amounts through a monthly ministerial order.
Jason Kenney, leader of the United Conservative Party, Alberta's official opposition, will provide reaction later on Sunday.
Kenney's news conference will be carried live on Facebook.
Any change in the price of oil has profound effects on Alberta's resource-dependent economy.
'Fire-sale prices'
Notley has faced pressure to take action, particularly in light of a Federal Court of Canada ruling in August that halted construction on the Trans Mountain Pipeline expansion to the west coast.
The so-called price differential started its sharp increase in September, rising to as much as $47 US a barrel in the last 10 days of October.
The gap was $28.50 US a barrel when markets closed on Friday.
The problem is caused by overproduction and a lack of pipeline capacity to get oil to market, according to the Alberta government. Notley said in an op-ed piece this week that there are 35 million barrels of oil selling at what she called "fire-sale prices."
A production cut was first proposed by the Alberta Party on Nov. 17. Kenney initially called for voluntary curbs on production by the industry, but changed his mind and proposed a 10 per cent cut last week.
On Friday, Notley used the op-ed to lay out the pros and cons of an industry-wide production cut.
Allowing the status quo to continue won't hurt producers that also have refinery operations, but it will hurt smaller companies, leading to bankruptcies and job losses, she wrote.