Alberta eases oil curtailment to placate energy companies
Will raise production limit for March
CALGARY— Alberta is gradually chipping away at its own oil curtailment program to placate energy companies that have grown unhappy with the mandated cuts. The oil-rich Canadian province amended the curtailment rules last Wednesday to allow some oilsands producers, and companies that pump crude from land with freehold mineral rights, to produce more than their quota. That decision came the same day the provincial government announced it would raise the production limit for March by 75,000 barrels to 3.63 million barrels a day.
The rule changes will exempt “only a few thousand barrels of production,” government spokesperson Michael McKinnon said in an email.
“We anticipate only a small amount of companies will need to use the regulation change.”
The curtailment, announced in early December, was designed to ease a glut caused by a shortage of pipeline space. Since taking effect, the measure has reduced inventories by five million barrels, the government said Wednesday.
They also caused local oil prices to surge, with Western Canadian Select trading at a discount of less than $10 (U.S.) a barrel to West Texas Intermediate futures, after the gap narrowed from $50 in October. Prices have also been supported by U.S. sanctions on Venezuela that have cut supplies of heavy crude to some U.S. refiners.
The cuts from Alberta and how they are being administered has grown increasingly contentious since taking effect in January. Even Canadian Natural Resources Ltd., a supporter of the cuts, warned service companies it would have to shut an oil pipeline following a previous rule change in December, according to two people who saw the notice.
Canadian Natural didn’t respond to an email seeking comment on the most recent changes. Husky Energy Inc., which opposed curtailment from the start, said the new limits didn’t go far enough.
“It’s a modest step forward, but the bottom line is we’re still going to have to curtail more barrels in February than we did in January,” Mel Duvall, a company spokesperson, said in an email.
Imperial Oil Ltd.’s opposition to the cuts hasn’t changed, spokesperson Lisa Schmidt said in her email.
“We disagree with the mandatory production cuts put in place by the Alberta government and are concerned about the unintended consequences of its decision to manipulate prices,” she said.