Saskatchewan rejects Alberta appeal for oil cuts
EDMONTON Saskatchewan says it won’t be following Alberta’s lead in slashing oil production as Premier Rachel Notley moved forward with cabinet measures Monday to institute an 8.7 per cent cut.
Notley announced Sunday that next year Alberta producers would see a reduction of about 325,000 barrels per day (bpd) in order to address a brutal oil price differential.
The price discount between Western Canadian Select (WCS) and West Texas Intermediate (WTI) has fluctuated in recent weeks, reaching around C$45 a barrel.
About 25 Alberta producers are expected to be affected by the curtailment until the 35 million barrels of oil currently in storage are shipped out of the province.
“We’ve reached out to Saskatchewan and indicated what we are doing,” Notley said during Monday ’s question period, responding to UCP Leader Jason Kenney’s call for a united front. “It would be great if they joined with us.”
But Saskatchewan Premier Scott Moe said his province won’t join the cause. However he promised to work with industry so as not to undermine Alberta’s efforts.
Saskatchewan is feeling the effects of the differential “to a great degree,” Moe told reporters in Regina.
“But the curtailment in Saskatchewan, from the advice we’ve received from the industry, will just not be effective.”
He said Notley’s decision was courageous given the lack of consensus among industry players over whether the province should intervene.
Saskatchewan’s market is significantly different than that of its neighbour, Moe said.
“Saskatchewan has no oilsands in active production and we are more diverse in what we produce. Further, roughly 60 per cent of the oil produced in Saskatchewan is a range of light and medium oil,” he said in a statement.
Notley’s cabinet met Monday to approve the measures that will allow for temporary oil curtailment. The minister of energy will have authority to set monthly levels and the system will be set out by the Alberta Energy Regulator (AER).
“Albertans know that extraordinary times call for decisive action,” Notley said, taking the opportunity to slam Ottawa for failing to intervene. “We don’t actually need Ottawa’s sympathy. We need Ot- tawa’s full attention. We need them to step up and help us bring an end to this crisis.”
Producers are making 190,000 bpd more of raw crude oil and bitumen than can be shipped out of Alberta, said the province. Cuts will initially reduce the oversupply by 325,000 bpd, but eventually that number will drop to 95,000 bpd after excess storage is depleted.
The plan, which would end Dec. 31, 2019, is expected to reduce the differential by at least US$4 per barrel relative to where it would have been otherwise.
Energy Minister Marg McCuaigBoyd said if Saskatchewan had decided to curtail oil, it wouldn’t have changed Alberta’s path forward.
“They’re a much smaller industry,” she told reporters. “I don’t want to speculate why they’re not doing it, I don’t know the reasons.”
Notley has repeatedly said building a pipeline is the only long-term solution to reduce the differential.
“Canadians understand that what we have going on right now is fiscal and economic insanity,” she said.