Edmonton

Alberta government will lift measures limiting oil production as of December

Due to the COVID-19 pandemic and the economic downturn, Alberta oil companies have been producing well below the established production limits for several months.

Due to COVID-19, Alberta oil companies have been producing well below established limits

The Alberta government will extend its regulatory authority to curtail oil production until December but stop setting monthly oil production limits. (Garth Lenz)

The Alberta government says it will stop setting monthly oil production limits in a bid to create jobs and to use available pipeline capacity.

The move comes days after an update from the national energy regulator, which said western Canadian oil companies have restored most of the production that had been curtailed this spring when the pandemic caused both oil demand and oil prices to crash. 

According to a news release sent early Friday, 16 per cent of Alberta's crude oil production remains offline, which is down from 22 per cent from March, when COVID-19 cases in Alberta began to rise. 

The government will extend its regulatory authority to curtail oil production through December 2021, the province said. 

The province said it has no plan to resume production limits at this time.

"Maintaining the stability and predictability of Alberta's resource sector is vital for investor confidence as we navigate the economic conditions brought on by the pandemic, the commodity price crisis and the need for pipelines," Energy Minister Sonya Savage said in the statement. 

"This purposeful approach serves as an insurance policy, as it will allow Alberta to respond swiftly if there is a risk of storage reaching maximum capacity while enabling industry to produce as the free market intended."

Since January 2019, production limits, which align production with export capacity, have aimed to protect the value of Alberta oil and prevent Canadian crude from being sold at discounted prices. 

The limits were originally intended as a short term measure but remained in place due to ongoing delays in pipeline projects including Keystone XL, the Trans Mountain expansion and Enbridge Line 3. 

The Alberta government will continue to monitor production, inventories, pipeline capacity and rail shipments to ensure that production does not exceed what the province can export.

Due to the COVID-19 pandemic and the economic downturn, Alberta oil companies have been producing well below the established production limits for several months, said the news release. In August, Alberta production was 3.10 million barrels per day, significantly less than the 3.81 million barrels per day curtailment limit.

The statement says that current forecasts show inventories are expected to remain low, with sufficient export capacity to allow the system to operate efficiently on its own well into 2021.

According to the Canada Energy Regulator most, but not all, western Canadian oil production has been restored after cuts triggered by low prices amid the pandemic.

In an update issued this week, the national agency said western Canadian oil supply had slipped by as much as 972,000 barrels per day by mid-May as demand fell due to pandemic lockdowns and global supply grew because of more output from a loose coalition of other oil-producing countries.

According to the CER, western Canadian producers had brought back online about 700,000 barrels per day by early October, leaving cutbacks at about 270,000 barrels per day.

In 2019, Western Canada produced an average of about 4.4 million barrels per day of oil.

Prices rose through the summer thanks to production cuts from OPEC-plus, a coalition that includes Russia, Mexico and Malaysia, and other producers around the world, including in the United States. At the same time, demand for crude oil grew in Canada and globally.

CER says a rebound in the price for Western Canadian Select bitumen-blend oil increased to roughly US$30 per barrel, higher than the operating costs of many western Canadian oil producers, and allowing some of their production to come back online.

It says its numbers are based on crude-by-rail exports, pipeline exports, refinery production and weekly oil storage injections and withdrawals.

With files from the Canadian Press

Comments

To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time.

now