Premier says no plans for Sask. to cut production
Saskatchewan’s government is not following Alberta’s plan to cut oil production in an effort to reduce the punishing price differential plaguing energy producers.
Premier Scott Moe said he understands the actions of Premier Rachel Notley’s government and supports it, but that the policy of curtailing production in Saskatchewan “just won’t be productive,” in part because it would cost jobs and be ineffective.
Moe said the decision was made “upon the advice from industry.”
About 25 producers are expected to face cuts until 35-million barrels of oil currently in storage are shipped out of Alberta.
The price differential between Western Canadian Select and West Texas Intermediate has fluctuated in recent weeks, peaking at around US$36 a barrel. The WTI price was close to Us$53/barrel late Monday afternoon and Western Canadian Select was selling for US$17 per barrel.
Unlike Alberta, 60 per cent of Saskatchewan oil isn’t subject to the price-differential questions. Despite that, the differential is expected to cost the province $96 million by the end of the fiscal year.
Saskatchewan still made much of the differential during its midyear financial update last week, when Finance Minister Donna Harpauer said “absolutely it’s a concern.”
Part of that concern is because the widening differential between light and heavy crude (forecasted to average 31.7 per cent over the fiscal year) leads to provincial coffers being reduced with every percentage point increase in the annual differential.
In Alberta, United Conservative Party Leader and Moe-ally Jason Kenney supported the actions taken by Notley’s government and encouraged Saskatchewan to follow suit. Moe said he spoke to Kenney directly about the issue, but did not take Kenney’s advice.
Instead, Moe said an announcement is being made later this week — likely Wednesday — “to ensure the industry is viable and sustainable in the long-term and into the future” from an economic and environmental perspective; but it’s expected those measures will not directly address the concern over the differential.
“Ultimately this is a problem and a challenge that is not going to be solved until we have access to our export markets, until we have proper pipeline capacity here in the nation and until we have a federal government that is not putting headwinds in front of an industry that is important to all Canadians,” he said.
But Saskatchewan’s overall outlook for oil prices remains positive.
Even with the differential costs, Saskatchewan is still coming out ahead because oil prices remain high (resulting in an extra $105 million) and a weaker Canadian dollar works in the government’s favour, adding an extra $11 million to provincial coffers.
Oil and natural gas revenue projections continue to go up, and are now $18.1 million higher than where they were seven months ago.