(Canadian Press)

Alberta cuts oil production to help deal with low prices

Alberta Premier Rachel Notley says as of January there will be an 8.7 per cent reduction ordered in oil production

Alberta Premier Rachel Notley is ordering a mandatory cut in oil production to deal with a price crisis that she says is costing Canada an estimated $80 million a day.

Notley says as of January there will be an 8.7 per cent reduction ordered in oil production.

Output of raw crude oil and bitumen will be reduced by 325,000 barrels per day. That figure is expected to shrink as a glut of oil in storage is reduced.

The mandated cut ends on Dec. 31, 2019 and will be spread among all producers in an effort to stave off massive job losses.

READ MORE: Alberta buying its own rail cars to move oil

Notley says the action is necessary to reverse the widening price differential that she said could cause further harm to Alberta’s economy if not addressed immediately.

Alberta’s oil is selling at markedly lower rates compared with the North American benchmark, due in part to oil pipeline bottlenecks.

“In the last few weeks, this price gap has reached historic highs because we are producing considerably more product than there is transport capacity,” Notley said in a speech timed to run live on supper-hour newscasts in Alberta.

“This is creating a huge backlog and forcing the price of our oil to ridiculously low levels…. We are essentially giving our oil away for free.”

Roughly speaking, Notley said, while the rest of the world sells its oil at about $50 per barrel, Alberta fetches only $10.

READ MORE: Oil and gas commission investigating earthquakes in northeast B.C.

The announcement is expected to narrow the differential by at least $4 per barrel and add an estimated $1.1 billion to government revenues in 2019-2020.

The premier has already said the province will buy as many as 80 locomotives and 7,000 rail tankers — expected to cost hundreds of millions of dollars — to move the province’s excess oil to markets, with the first shipments expected in late 2019.

But she has said that rail cars, along with eventually increasing domestic refining capacity and building new pipelines, won’t bring relief soon enough.

“We must act immediately,” Notley said Sunday.

The Opposition United Conservatives and the centrist Alberta Party had already called for the production cut. Notley thanked them both in her speech.

Industry feelings prior to the announcement had been mixed.

Cenovus Energy proposed the idea of a production cut last month. However, Imperial and Husky said Friday they remain opposed to involuntary production cuts.

The move is not unprecedented — in 1980, Tory premier Peter Lougheed forced oil production cuts to protest the federal Liberals’ national energy program.

The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Abbotsford mortage broker named to Hall of Fame

Geoff Lee of GLM Mortgage Group also receives Hot List Award

Meet the Easter Bunny in drive-thru style in Abbotsford

Maan Farms hosts holiday breakfast-to-go, while following social-distancing

Abbotsford’s Hadwin, Taylor set for Masters in November

Golf tournament moves from April to November due to COVID-19 pandemic

Abbotsford Senior’s Marin Lenz signs with Calgary Dinos

3A provincial basketball most valuable player commits to Calgary school for the fall

Mission Institution has highest number of positive results for COVID-19

11 inmates test positive for coronavirus, more than any other federal prison in Canada

UPDATE: Canadians awake to extra COVID-19 emergency benefit money, feds clarify changes

The CRA and federal officials are working to clarify the confusion around payments

B.C. sorting medical equipment sales, donation offers for COVID-19

Supply hub has call out for masks, gowns, coronavirus swabs

B.C. records five more deaths due to COVID-19, 45 new cases

A total of 838 people have recovered from the virus

Major crimes investigating sudden death of North Okanagan child

The 8 year old was flown to Kelowna General Hospital and died hours later

Easter Bunny added to B.C.’s list of essential workers

Premier John Horgan authorizes bunny to spread “eggs-ellent cheer” throughout province

Travellers returning to B.C. must have self-isolation plan or face quarantine: Horgan

Premier John Horgan says forms must be filled out by travellers

More than 400 animals have been adopted amid pandemic: B.C. SPCA

People are taking this time of social distancing to find a loyal companion through the animal welfare group

B.C. secures motel, hotel rooms for COVID-19 shelter space

Community centres, rooms reserved for pandemic self-isolation

Most Read