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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Canadian Oil Producers Divided On Output Cuts

Crude oil producers in Alberta appear to be split on a proposed cut in production amid record-low prices, Canadian media report.

One of the large Canadian oil producers, Cenovus Energy, is calling upon the government of Alberta to mandate temporary production cuts at all drillers in a bid to ease Canadian bottlenecks that have resulted in Canada’s heavy oil prices tumbling to a record-low discount of US$50 to WTI.

The province of Alberta, the heart of Canada’s oil sands production, has the necessary legislation to have all producers agree to production cuts and it needs to use it now, Cenovus said in an emailed statement to Bloomberg yesterday.

“We’re probably producing about 200,000 or 300,000 barrels per day of oil in excess of our ability to get that oil out of the province, either by pipelines or by rail,” Cenovus’ CEO Alex Pourbaix told Global News.

However, other big players disagree that the industry needs to produce less. “Our position is that government intervention in the market would send the wrong signals to the investment community regarding doing business in Alberta and Canada. And we really do need to take a long-term view and allow the market to operate as it should,” Global News quoted a spokeswoman for Suncor as saying. Related: Natural Gas Markets Remain Ultra Tight

However, Suncor is in a favorable position: according to the company spokeswoman it has no exposure to the suffocating differential between Western Canadian Select and West Texas Intermediate since it processes as much as 70 percent of its crude at home.

Husky Energy is another of the large Canadian producers who oppose a government-led intervention in production rates. According to Husky, “Market intervention comes with an unacceptably high level of economic and trade risk.”

The Canadian Association of Petroleum Producers (CAPP) has officially estimated that the wide Canadian oil price discount cost producers at least US$9.8 billion (C$13 billion) in the first ten months of 2018, according to The Canadian Press, but CAPP’s chief executive Tim McMillan says that the real costs could be as high as US$75.6 billion (C$100 billion) annually.

By Irina Slav for Oilprice.com

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  • Mike Kom on November 16 2018 said:
    Terrible news for Brooks, Alberta. I love it!
  • Kris on November 16 2018 said:
    Are you a happy government welfare recipient. Be careful, because considering Gov. of Alberta huge deficits, they may decide to go first after welfare bums like you. This would be very easy, and no political fallout.

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