Province hands out notices to companies forced to cut oil production

The province is in the process of notifying the 25 companies that will have to make production cuts to reduce the oil differential, says Alberta’s energy minister.

“Right now we’re working with each individual company,” said Minister Marg McCuaig-Boyd on Wednesday. “There wasn’t agreement before but I think companies realize these are extraordinary times.”

Premier Rachel Notley announced Sunday that Alberta would slash oil production temporarily by 8.7 percent starting in January, amounting to about 325,000 barrels per day (bpd).

The move aims to ship out 35 million barrels of oil currently sitting in storage and reduce the oil glut.

The price differential between Western Canadian Select (WCS) and West Texas Intermediate has fluctuated in recent weeks, peaking at around C$45 a barrel. After the weekend announcement, the value of WCS heavy crude shot up to the relief of investors.

Cuts will be determined on an operator basis, not by well or project. The baseline will be calculated by averaging the six months of highest production level over the past year for each company.

The first 10,000 bpd for each company will be excluded in an effort to protect small producers, said the province.

‘Confident’ curtailment is trade compliant

“This wasn’t an easy decision,” McCuaig-Boyd told reporters Wednesday.

“We sought multiple perspectives and legal advice on this … we’re confident that we’ve done our homework on this and we are trade compliant,” she added. “We’re maintaining the volumes in our pipelines but what we’re working on is the oversupply here in Alberta.”

The province said oil production cuts will add an estimated $1.1 billion to Alberta government revenue in 2019-20.

The plan, which would end Dec. 31, 2019, is expected to reduce the differential by at least US$4 per barrel relative to where it would have been otherwise.

Notley, who moved forward with cabinet measures to implement the cuts on Monday, has repeatedly said building a pipeline is the only long-term solution to reduce the differential.

“Canadians understand that what we have going on right now is fiscal and economic insanity,” she said Monday.

The system will be set out by the Alberta Energy Regulator (AER) with the energy minister responsible for setting monthly curtailment levels.

cclancy@postmedia.com

twitter.com/clareclancy

***

Note from WSOE.Org : This content has been auto-generated from a syndicated feed.