Published: Mon, December 03, 2018
Markets | By Otis Pena

Alberta Enforces 8.7% Oil Production Cut

Alberta Enforces 8.7% Oil Production Cut

Premier Rachel Notley is ordering a mandatory cut to oil production to deal with a price crisis she says threatens to gut Alberta's bedrock industry. "And a high-value era must begin", Notley said in a statement.

However, he says we should turn our eyes to the world stage. The province estimates 25 producers will have to impose cuts.

Notley says Alberta's resources are being sold for "pennies on the dollar" and she has ordered oil producers to slash production by 8.7 percent in an attempt to shore up prices.

Announcing the measure on Sunday, Premier of Alberta Rachel Notley said that the province is "facing a hard challenge", but the move is aimed to reverse an unprecedented price gap that has seen the province's crude sell for significantly less than the global price.

Cenovus Energy proposed a reduction last month and the idea has been supported by opposition politicians in Alberta, including United Conservative Party leader Jason Kenney.

Alberta produces 3.7 million barrels a day, but that's 190,000 barrels more than can be shipped.

The discount between Western Canadian Select bitumen-blend oil and New York-traded West Texas Intermediate was about US$21 per barrel on Monday morning, an improvement of about US$7 per barrel from Friday, according to Net Energy.

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But he said Notley's government has played a role in creating the problem by not pushing back as the federal government cancelled the Northern Gateway pipeline to B.C. and introduced legislation that industry leaders say will make it more hard to get oil megaprojects approved.

Cabinet approved the measures, giving Energy Minister Marg McCuaig-Boyd the power to direct the Alberta Energy Regulator to enact the production cuts.

The price differential for Western Canadian Select (WCS) versus West Texas Intermediate (WTI) has been around $30 to $50 USA recently, peaking at $52 in October.

Moe said Saskatchewan's oil industry differs from Alberta. "I've let Albertans know many times that we are going to get reaction to get to balance and I'm confident we will", said Minister of Finance Joe Ceci.

Notley said the government has a duty to protect resources as they are owned by every Albertan.

"I would like to commend Premier Rachel Notley and her government for making the hard but necessary decision to implement a temporary mandatory oil production cut in Alberta", he said in a statement.

Cenovus Energy has also issued a response to the measures, saying under normal circumstances oil and gas producers would never advocate for government intervention. CEO Alex Pourbaix, another prominent voice inside the industry.

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