Alberta to cut oil production by 8.7 per cent to deal with low prices

CTVNews.ca Staff, with a report from CTV Edmonton’s Nicole Weisberg</span>
Published Sunday, December 2, 2018 12:26PM EST
Last Updated Sunday, December 2, 2018 9:06PM EST

Alberta’s premier announced on Sunday that the province will temporarily cut its oil production in an attempt to reverse a historic price gap that has seen Alberta crude sell for significantly less than the world price.

Premier Rachel Notley said the province will mandate a temporary oil production cut of 325,000 barrels of oil per day, or 8.7 per cent, starting in January 2019. She added that the reduction will be subject to a monthly evaluation and that the curtailment amount will decrease over the year.

“In Alberta, we believe that markets are the best way to set prices,” Notley said, “But when markets aren’t working, when companies are forced to sell our resources for pennies on the dollar, then we have a responsibility to act, to defend our province and to defend our resources.”

Notley hinted at her intentions in an op-ed piece published over the weekend in various Alberta newspapers. She laid out the problem, saying 35 million barrels of Alberta oil are sitting in storage because of transportation backlogs.

“With so much oil just sitting there, unable to be moved, it is being sold at fire-sale prices, around $10 a barrel,” she wrote.

“Other oil products around the world are selling for five, six times more. It’s absurd, economically dangerous, and cannot be allowed to continue.”

The province plans to buy thousands of rail tankers and up to 80 locomotives to get its product flowing, but those measures are not expected to be in place until late 2019.

The U.S. is the only country currently purchasing Alberta oil.

Asked about the issue on CTV’s Question Period,federalInnovation Minister Navdeep Bains said the government was attempting to help the oil industry by looking for ways to help diversify the market for Alberta oil and by purchasing the Trans Mountain pipeline.

“We’re taking every possible tool that we have in our toolbox to bring in more investments,” he said.

One oil market analyst told CTV Edmonton that the province seemed to be “making the best out of a bad situation” and had no true winning moves.

“It is a crisis,” Kevin Birn said.

“Mandatory curtailment is not the good solution, but it may be the only one available to the government.”

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