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Zainab Calcuttawala

Zainab Calcuttawala

Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…

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Cenovus Energy Reduces Oil Production Due To Shipping Difficulties

Canada Oil

Canada’s Cenovus Energy announced a planned slowdown in production due to shipping difficulties out of critical production areas, according to a new report by Bloomberg.

Cenovus’ Christina Lake and Foster Creek facilities have already been producing at lower volumes since February, a statement on Thursday read. Cenovus share prices fell by 6.1 percent at the Toronto Stock Exchange, along with other Canadian fossil fuel companies like Suncor Energy and Canadian Natural Resources Ltd.

“We’re taking steps to respond to a critical shortage of export pipeline capacity in Western Canada that is beyond our control and is having a negative impact on our industry and the broader Canadian economy,” Chief Executive Officer Alexander Pourbaix said in a corporate statement. The bottlenecks “clearly demonstrate the urgent need for approved pipeline projects in Canada to proceed as soon as possible.”

Railroads will begin playing a larger role in the transportation of crude resources to refineries and processing centers as environmental groups and hostile provincial laws make pipelines difficult to construct.

“I expect the industry is going start seeing much more volumes by rail moving by middle of the year onward," the CEO said during the CERAWeek by IHS Markit oil-industry conference in Houston earlier this year. While rail companies want the shipments, “it’s really been a function for them of capacity, and having the power and the locomotives to do it.”

Oil and gas producers in the north are struggling to stay competitive because of rising transportation costs as pipeline projects fail to materialize time and time again. Canada plans to create a new system for the approval of major energy projects.

"If Canadian governments allowed pipelines to be built expeditiously, the competitiveness of western Canadian oil producers would be greatly improved," Benjamin Dachis of C.D. Howe said.

By Zainab Calcuttawala for Oilprice.com

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