Alberta eases oil production cap by 75K barrels per day

The Alberta government announced Wednesday it was increasing the oil production curtailment limit for February and March to 3.63 million barrels a day.

The January limit was 3.56 million barrels per day, so this change translates to a 75,000-barrel per day increase. (The province clarified the 3.56 million and 3.63 million numbers were rounded).

READ MORE: Alberta orders 8.7 per cent oil production cut to help deal with low prices

Last month, the province ordered production of raw crude oil and bitumen to be reduced by 325,000 barrels per day to deal with low prices. The 8.7-per cent reduction came into effect Jan. 1.

Premier Rachel Notley said the oil price crisis was costing Canada an estimated $80 million a day.

The discount has since narrowed. According to figures on the Petroleum Services Association of Canada’s website, the differential was just US$9 as of Tuesday.

On Wednesday, Premier Rachel Notley said the decision to ease oil production curtailment levels was made based on new data on the amount of oil in storage.

READ MORE: Alberta oil production cap remains unchanged despite price recovery

“We’re not out of the woods yet but this temporary measure is working,” Notley said.

Tweet This Click to share quote on Twitter: "We're not out of the woods yet but this temporary measure is working," Notley said.

“While it hasn’t been easy, companies big and small have stepped up to help us work through this short-term crisis while we work on longer-term solutions, like our investment in rail and our continued fight for pipelines.

“I want to thank Alberta producers for working with us to protect the jobs and livelihoods of thousands of Alberta families and businesses, and your cooperation has been key to easing these limits ahead of schedule.”

The province said the amount of oil in storage has dropped more quickly than expected since it introduced the production cap in December, declining five million barrels to 30 million.

The first 10,000 barrels per day a company produces are exempt from the cuts, affecting 28 of more than 300 Alberta players.

WATCH BELOW (Jan. 29, 2019): A company that was at first in support of Alberta’s oil curtailment plans is now expressing concern. Workers and community leaders in Bonnyville are warning of impacts on jobs. Vinesh Pratap reports.

2:34 Alberta workers fear job cuts after oil production cap formula change

Tristan Goodman, president of the Explorers and Producers Association of Canada, told a news conference Wednesday he’s glad to see a sensible approach toward easing the production cuts, but it will only go so far.

“Without fixing the market access problem, the reality is you’re going to eventually end up back in a similar situation because we’re missing that fundamental key piece that we’re going to keep hammering on, which is market access.”

Tweet This Click to share quote on Twitter: "Without fixing the market access problem, the reality is you're going to eventually end up back in a similar situation because we're missing that fundamental key piece that we're going to keep hammering on, which is market access."

READ MORE: Federal government needs to ‘step up’ and support Alberta’s oil and gas industry: Notley

Gary Mar, head of the Petroleum Services Association of Canada, said the curtailment policy has been tough on members of his group, which are contracted by oil and gas producers.

He said he’d like to see the cuts end as long as it’s in a “rational way.”

He cited one central Alberta company that had a $4-million drilling contract lined up before the cap was brought in.

“They assembled all of the equipment and all the manpower necessary to complete the contract, which would have commenced Jan. 1,” Mar said.

“That project is now cancelled indefinitely and this company is quite likely to go under in the next quarter … This is not a hypothetical issue.”

READ MORE: Eastern Alberta communities fear NDP’s oil production cap change will mean job losses

The curtailment formula – and recent changes to February numbers – drew concern from oil workers in eastern Alberta earlier this week.

Industry spoke out after a letter from CNRL stated a formula change by the NDP would mean job losses.

On Friday, CNRL said the government’s limit change means the company will be able to “maintain production at levels to safely operate the ECHO pipeline.

“Keeping the ECHO pipeline and associated heavy oil production operating means that we will be protecting up to 2,400 jobs for contractors and service providers in the region,” CNRL spokesperson Julie Woo said.

— With files from Lauren Krugel, The Canadian Press