Oil curtailment mistakes to blame for Alberta rail plan, Husky says

CALGARY— The Alberta government’s decision to spend $3.7 billion to move more crude by rail was made necessary by its poorly considered move to impose production curtailments, executives with Husky Energy Inc. charged on Tuesday.

The Calgary-based company, which has opposed curtailments as an unwelcome interference in the market, raised its level of criticism on a conference call to discuss its fourthquarter results.

Husky maintains that its integrated upstream and downstream operations and pipeline contracts had allowed it to continue to make a profit even when discounts on western Canadian crude reached record levels last November.

“For Husky, it’s absolutely a net negative because we were completely capturing the full value of the value chain prior to curtailment and all that’s happened is we’re producing less barrels now,” said CEO Rob Peabody.

The province imposed production quotas as of Jan. 1 on larger producers designed to keep 325,000 barrels per day of crude off the market, supporting prices by opening space on full export pipelines and draw- ing down overflowing storage.

Discounts evaporated, leading to criticism from companies with refining and retail assets — who had opposed the production cuts — that crude-by-rail was no longer profitable.

Curtailment supporter Cenovus Energy Inc., however, said it would increase its crude-by-rail shipments as economics would likely improve over time. The province announced it would increase production quotas in February and March by 75,000 bpd due to declining storage levels. But chief operating officer Rob Symonds said Husky is actually being hit harder now than it was in January.