The Alberta government says it will stop setting monthly oil production limits for producers by the end of the year.
The government had previously planned to exit curtailment by the end of 2020 provided export routes were in place. The province confirmed the December 2020 end date in a news release Friday morning.
The move is intended to allow producers to use available pipeline capacity and create jobs. The government said that it has extended its regulatory authority to curtail oil production through December 2021, but added that it will not set production limits because 16 per cent of Alberta’s crude oil production remains offline. This is down from 22 per cent at the start of the COVID-19 pandemic, according to the province.
“Maintaining the stability and predictability of Alberta’s resource sector is vital for investor confidence as we navigate the economic conditions brought on by the pandemic, the commodity price crisis and the need for pipelines,” Energy Minister Sonya Savage said in a media release.
“This purposeful approach serves as an insurance policy, as it will allow Alberta to respond swiftly if there is a risk of storage reaching maximum capacity while enabling industry to produce as the free market intended.”
The curtailment policy was brought in by the former NDP government as the price gap between western Canadian heavy crude and U.S. light oil ballooned to more than US$40 a barrel in late 2018, ravaging companies’ bottom lines and provincial revenues.
The province and industry players have said the root of the problem is an inability to export Canadian oil as regulatory and legal challenges bog down new pipeline projects.
The UCP government said in a media release Friday it will continue to press for the timely completion of vital pipeline projects, including Keystone XL, the Trans Mountain pipeline expansion and Enbridge Line 3.
The province said project delays, as well as the COVID-19 pandemic and resulting economic downturn, have meant that Alberta’s production capabilities still exceed takeaway capacity. In August, Alberta production was 3.10 million barrels per day, which is less than the curtailment limit of 3.81 million barrels per day.
The government said if forecasts show shortage inventories approaching maximum capacity, it could put production limits back in place. However, the province said Friday it does not plan to resume production limits at this time.
Due to the economic effects of COVID-19, the province said experts do not expect production in Western Canada to be above pipeline capacity before mid-2021 at the earliest.
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