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Alberta Forced To Buy Oil Trains

oil train

The Government of Alberta has been forced into buying more oil trains to move crude from the province, the Calgary Sun reports, quoting Premier Rachel Notley as describing the situation with Alberta’s oil as “fiscal and economic insanity.”

The trains will have a total capacity of 120,000 bpd and will cost Alberta US$263.77 million (C$330 million). The trains should reach their full capacity late next year and help reduce the discount of Western Canadian Select to West Texas Intermediate by about US$3 (C$4) per barrel. That’s not a lot given the discount between WCS and WTI is more than $40 a barrel, but according to Notley, it would generate US$750,000 (C$1 million) daily in new government revenues.

“We have already engaged a third-party to negotiate and work is well under way. We anticipate conclusion of the deal within weeks,” the Premier said at a meeting with business executives. However, the new trains will likely only provide temporary relief as Alberta’s crude oil production is set for continued growth despite calls from the industry and from the opposition United Conservative Party for production cuts in order to erase some of the discount, at which Canadian crude is trading to the U.S. benchmark WTI.

A recent economic outlook for the oil province from the Alberta Treasury Branches, a government-owned provincial financial services provider, said the economy was improving slowly, and GDP growth next year was seen at 2.1 percent. However, the Calgary Sun notes, ATB Financial’s chief economist who authored the report had to revise it twice, both times downward, before it was finally published.

“In Alberta’s economy, we feel like we’re in this suspended animation, waiting for something to happen,” Todd Hirsch said, adding that more revisions were likely in either direction.

Meanwhile, production is rising faster than previously expected: the National Energy Board recently said crude oil production in Canada will average 4.59 million bpd, up by 22,000 bpd from earlier forecasts.

By Irina Slav for Oilprice.com

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