(Canadian Press)

Alberta cuts oil production to help deal with low prices

Alberta Premier Rachel Notley says as of January there will be an 8.7 per cent reduction ordered in oil production

Alberta Premier Rachel Notley is ordering a mandatory cut in oil production to deal with a price crisis that she says is costing Canada an estimated $80 million a day.

Notley says as of January there will be an 8.7 per cent reduction ordered in oil production.

Output of raw crude oil and bitumen will be reduced by 325,000 barrels per day. That figure is expected to shrink as a glut of oil in storage is reduced.

The mandated cut ends on Dec. 31, 2019 and will be spread among all producers in an effort to stave off massive job losses.

READ MORE: Alberta buying its own rail cars to move oil

Notley says the action is necessary to reverse the widening price differential that she said could cause further harm to Alberta’s economy if not addressed immediately.

Alberta’s oil is selling at markedly lower rates compared with the North American benchmark, due in part to oil pipeline bottlenecks.

“In the last few weeks, this price gap has reached historic highs because we are producing considerably more product than there is transport capacity,” Notley said in a speech timed to run live on supper-hour newscasts in Alberta.

“This is creating a huge backlog and forcing the price of our oil to ridiculously low levels…. We are essentially giving our oil away for free.”

Roughly speaking, Notley said, while the rest of the world sells its oil at about $50 per barrel, Alberta fetches only $10.

READ MORE: Oil and gas commission investigating earthquakes in northeast B.C.

The announcement is expected to narrow the differential by at least $4 per barrel and add an estimated $1.1 billion to government revenues in 2019-2020.

The premier has already said the province will buy as many as 80 locomotives and 7,000 rail tankers — expected to cost hundreds of millions of dollars — to move the province’s excess oil to markets, with the first shipments expected in late 2019.

But she has said that rail cars, along with eventually increasing domestic refining capacity and building new pipelines, won’t bring relief soon enough.

“We must act immediately,” Notley said Sunday.

The Opposition United Conservatives and the centrist Alberta Party had already called for the production cut. Notley thanked them both in her speech.

Industry feelings prior to the announcement had been mixed.

Cenovus Energy proposed the idea of a production cut last month. However, Imperial and Husky said Friday they remain opposed to involuntary production cuts.

The move is not unprecedented — in 1980, Tory premier Peter Lougheed forced oil production cuts to protest the federal Liberals’ national energy program.

The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Sidney part of a region that suffers ‘chronic shortage’ of daycare spaces

Consultants find that Sidney needs 233 new spaces to meet the current demand for daycare

Thieves harvest from 11 unlocked cars in Oak bay

Looting unlocked cars called ‘farming,’ says deputy chief

Friday night tickets affect Saturday behaviour at the University of Victoria

Saanich police see direct response after issuing several $230 fines

HMCS Victoria popping up as training sessions underway

MARPAC says plume of smoke normal for recharging submarine

West Shore RCMP seeks video footage after homeowner interrupts Colwood break and enter

Police were called to 600-block of Stornoway Drive late Sunday

COVID-19: 4 more deaths, 366 new cases in B.C. since Friday

A total of 8,208 people in B.C. have tested positive for COVID-19 since January

POLL: Do you plan on allowing your children to go trick or treating this year?

This popular annual social time will look quite different this year due to COVID-19

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Group wants Parliament, courts to hold social media to same standard as publishers

Daniel Bernhard made the comments shortly after Friends of Canadian Broadcasting released a research paper

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

COVID-19 liquor, music rules extended with fines

‘Nightclubs must cease operating as nightclubs’

Carole James heads ‘caretaker’ B.C. government

James is among 15 MLAs retiring at the end of their current term

B.C.’s Chase Claypool catches first NFL touchdown pass

Abbotsford grad establishes new record for longest scrimmage TD by a Canadian

Most Read