Moe will not cut oil production despite pleas from Alberta's opposition leader

Jason Kenney would like to see Saskatchewan oil producers follow its lead and slow down oil production, but Moe says that isn't going to happen.

Alberta bringing in temporary production cut next month, meant to increase oil prices

Saskatchewan Premier Scott Moe said the province will not cut oil production. (CBC News)

Saskatchewan Premier Scott Moe said the province isn't going to cut oil production despite being asked to by Alberta's opposition leader Jason Kenney.

On Sunday, Alberta Premier Rachel Notley announced the province would implement a temporary 8.7 per cent production cut starting next month. The move is meant to combat steep discounts currently placed on Alberta oil.

The production cuts are an attempt to address the difference in the price of Western Canadian Select oil relative to the benchmark West Texas Intermediate (WTI). That gap hit around $50 in late October due to a lack of pipeline capacity to get Alberta oil to market.

The cuts will affect about 25 larger bitumen and conventional producers in Alberta. Larger producers will see their first 10,000 barrels exempted each day. Companies that produce less than 10,000 barrels a day will not be affected by the daily cuts.

Kenney, leader of Alberta's opposition United Conservative Party, said Saskatchewan should also cut production.

"We would hope that producers outside of Alberta would understand that they would need to be part of the solution in saving jobs."

Moe said that while he agrees there is an unacceptably high differential for Alberta oil, a government-mandated production cut in Saskatchewan is not in the works.

"Saskatchewan is also feeling the effect of the price differential here in the province to a great degree. It's costing our industry not only employment opportunities but it is costing them investment opportunities here in the province."

Moe said any cut in Saskatchewan will hurt conventional oil production and would have little impact on the price of oil.

"The markets are different, the mix is different and the industry is telling us that curtailment will not be as affective, or even effective, in Saskatchewan."

Moe said Alberta cutting oil production reflects a crisis in Western Canada's energy sector and is "a clear failure of the federal government to build pipelines and ensure market access for our energy products has had a great cost on the economy and the people of Saskatchewan."

United Conservative Party leader Jason Kenney echoed Premier Rachel Notley's statement that oil belongs to Albertans. (CBC)

Saskatchewan has no oil sands production. About 60 per cent of the oil produced in Saskatchewan is light and medium oil. 

On Monday, Alberta Energy Minister Marg McCuaig-Boyd said her government had been in contact with Saskatchewan.

"They're seeing the differential hurting their prices. It's about jobs there. They're not as big a player as us but they're still a player," McCuaig-Boyd said.

"At the end of the day, this isn't just about Alberta, this a national priority. The more we can get on board the better."

Alberta Premier Rachel Notley speaks during an announcement of a mandatory cut in oil production on Sunday, Dec. 2, 2018. (Jason Franson/The Canadian Press)

Kenney said that not all of Saskatchewan's oil production would be affected.

"It's true that some of it down in the Bakken Reserve in southeast Saskatchewan is integrated into the U.S. market," he said. "It does not face the same differentials."

Premier Notley told reporters the province would be measuring the effect of the cuts each month to make sure production is not lower than necessary.

The Alberta government said it believed industry would not voluntarily make the cuts after sending three envoys to talk to small and large producers.

While some large oil producers agreed with the cuts, others weren't happy, stating that the move could have unintended consequences in the industry.

With files from Michelle Bellefontaine