The government of Alberta is looking to protect the value of our energy exports.
The province is enhancing its curtailment policy to help in the fight to increase market access with the end date set for December 31, 2020.
The updated policy provides more flexibility for the industry – including providing oil producers with more advanced notice of changes to production limits and doubling the base limit for curtailment.
Speaking to reporters, Minister of Energy Sonya Savage says last year’s price differential for Canadian Oil of around $43/barrel – made the extension essential.
“That’s a loss of revenue to the province of over $8 billion. For every dollar that the differential spread – it’s a loss of revenue to Albertans – who are owners of the resource – of about $210 million.
Without curtailment, the province expects production to exceed takeaway capacity – or the amount that can be shipped for export – by 150,000 barrels per day.
Large discounts for Canadian crude also would be projected.
Savage notes the extension simply came down to lack of pipeline construction and capacity issues.
“Companies are trying to bring on optimization programs to move more product in the existing pipelines, but it’s capacity in general. We would like to see capacity match production – and that is the issue.”
In addition, the extension would increase the base deduction from 10,000 BPD to 20,000 BPD and adjust the curtailment formula accordingly – resulting in an increase of about 25,000 BPD to the allowed production limit for October.
It will also reduce red tape for small producers.
Savage adds an extension is the last thing the provincial government wanted – but that it’s essential to improving market access.
“Extending this policy is not our first choice but at this time, we’re facing continued pipeline constraints and so, it’s necessary. Through these adjustments, we’re better protecting the value of our resources.”
The changes will take place in October 2019.