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The Albertan government is preparing a low-interest credit package for the struggling oil industry in Canada’s oil heartland to mitigate the worst consequences of the latest price collapse.
"We are potentially looking at setting up a credit facility that would allow for access to credit at lower rates of interest for highly distressed companies," Premier Jason Kenney said as quoted by CBC News. He added that he had raised the topic with federal finance minister Bill Morneau but that it was too early to share any details.
Western Canadian Select was trading at just $16.10 a barrel today, at the time of writing, sinking from close to $40 a barrel last month before the coronavirus began spreading globally for real.
Alberta’s oil industry has already been battered by a pipeline shortage that has pressured the price of the commodity produced in the province, by higher transport costs associated with oil trains that companies have been forced to use to move their oil, and by the unfavourable investment climate that recently made Teck Resources cancel its $20-billion Frontier oil sands project that would have added more than 250,000 bpd to Alberta’s oil production.
Related: Oil Price Crash Continues Despite $1.5 Trillion Fed Intervention
Interestingly enough, the Albertan government was quite optimistic about the energy sector when it released its budget plan for 2020-2023 last month. In the document, the government said it expected more oil pipelines to come online in the province during this year and next, and oil sands production to increase, while the gap between West Texas Intermediate and Canadian crude narrows. The government of Canada’s oil heartland expects the average for WTI during fiscal 2020-21 to be $58 a barrel, rising to $63 in fiscal 2021-22.
Now that this is unlikely to happen, plans may have to be revised. Kenney said the government had already set aside $100 million in loans for orphan well reclamation that would create jobs and that the provincial government would push for a pause in new federal regulations that would have a bearing on the energy industry.
"Layering on additional regulatory costs, which could impose billions of dollars of cost on the Canadian energy sector right now, would be like going to the Ontario auto sector in 2008 and saying, 'oh, by the way, we're going to force you to pay billions more in federal regulations,'" the Alberta Premier said.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.