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Alberta’s long-suffering oil industry is “on life support” because of the spread of the Covid-19 pandemic—and things will get worse before they get better, Premier Jason Kenney told media as quoted by CBC.
"We must begin to prepare ourselves for a time of adversity unlike any we have seen since the 1930s in this province," the Premier said.
Canada’s chief oil province has not been spared its share of the rising number of people infected with Covid-19 but on top of the pandemic, Alberta is also reeling from the blow that Saudi Arabia dealt oil producers by declaring it will raise oil production from next month, aiming for more than 12 million bpd and, possibly, up to 13 million bpd if it succeeds in boosting its production capacity.
Earlier this month, Kenney said the Albertan government was preparing a low-interest credit package for the struggling oil industry 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," the province’s Premier said.
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Yesterday, the Western Canadian Select oil benchmark sank to the lowest on record, at $7.63 per barrel, down by nearly $5 from Tuesday. As a result, oil company shares also sank, triggering heavy trading, which in turn activated the Toronto Exchange’s circuit breakers that switch on at a share price change of more than 7 percent, CBC New reported.
Despite the ominous signs, the Albertan government appeared 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. It also expected oil sands production to increase, while the gap between West Texas Intermediate and Canadian crude narrows. At the time, the Alberta government expected the average for WTI during fiscal 2020-21 to be $58 a barrel, rising to $63 in fiscal 2021-22.
Now all bets are off, with WTI trading lower than $25 a barrel.
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.