The Next Challenge for Canada's Oil Patch Comes From the Sea

Marco Green
December 4, 2018

"That coupled with the rail cars that we're moving forward in purchasing is our medium-term solution".

"What we now have is a serious glut in oil, which can't be resolved until OPEC gets together on Thursday and decides to cut back along with Russian Federation and a few other producing nations". The government says the reduction will be in force until excess storage is drawn down, after which it will drop to an estimated average of 95,000 barrels a day.

The cuts will affect about 25 larger bitumen and conventional producers in Alberta.

About 35 million barrels of oil are in storage - about twice the normal levels.

The move is expected to raise the price of Canadian crude by at least $4 per barrel and add around $1.1 billion to Alberta government revenues in 2019-2020. The restriction will come into effect in January and will be in place until December 31, 2018.

The current glut is due in part to pipeline bottlenecks.

The Trans-Mountain line to the B.C. coast is now in legal limbo despite being approved two years ago.

Calgary-based Cenovus climbed as much as 13 percent in Toronto and Canadian Natural Resources gained 16 percent, while Devon Energy Corp., a US oil company with a presence in Alberta, rose as much as 8 percent in NY. Global prices crashed last month by the most in more than a decade, a plunge that battered producers in Alberta in particular amid surging oil-sands output, a shortage of pipeline space and heavy USA refinery maintenance.

The Opposition United Conservatives and the centrist Alberta Party had already called for the production cut.

It barely took Notley 10 minutes of her live-streamed news conference, which began at 6 p.m., to prove that even in this neoliberal era governments can act, and do so decisively.

Notley told reporters at her announcement that it doesn't matter the size of the oil company, producers big and small will be affected.

Moe said Saskatchewan's oil industry differs from Alberta.

The losers include integrated producers who will likely pay more for their refining feedstock and companies that had meant to grow their production in the first half of 2019, it said. Industry groups and pundits scolded protestors, declaring that the oil would find its way to the market one way or another. Still, she said many pipeline delays were hard to predict amid assurances by industry and government that pipelines could be successfully built to tidewater.

"They dragged their feet". At the recent G20 summit in Argentina, Trudeau said "there are gender impacts when you bring construction workers into a rural area - there are social impacts because they are mostly male construction workers".

"It's frustrating to me to see so many people losing their jobs as a result of this incompetence". "We interpret the phrasing of the announced cut as keeping production down 50 kb/d [year-on-year] in 2019 and 200 kb/d below our prior assessment with the greatest impact on 1Q19 (down 225 kb/d quarter-on-quarter) before new rail capacity gradually comes online from April onward", Goldman Sachs wrote in a note.

Cenovus Energy proposed the idea of a production cut last month.

Imperial CEO Rich Kruger warned of the danger of "unintended consequences" of the production cuts, including to competitiveness and trade.

Other reports by Click Lancashire

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