Saskatchewan won't curtail oil production | Oil & Gas

Premier Scott Moe speaks on the new USMCA deal in Saskatoon

Premier Scott Moe speaks on the new USMCA deal in Saskatoon

Premier Scott Moe said Monday afternoon that he understands and supports the actions taken by the Alberta government to address the glut of oil, but the situation is different in Saskatchewan.

Canada's oil-producing province, Alberta, has announced an 8.7-percent reduction in oil production, about 325,000 barrels daily, beginning next year in a bid to raise "historically low prices" in the sector and protect jobs.

Indeed, when Suncor reported third-quarter results on October 31, it said the discount on heavy Canadian oil prices was having a "minimal" impact on its operations.

Moe said that while he agrees there is an unacceptably high differential for Alberta oil, "a government-mandated production cut in Saskatchewan could result in a loss of jobs and economic activity in our province, but would have little impact on the price of oil because it would disproportionately impact conventional oil production, which is not the problem".

Shares in the companies most likely to benefit from the move to curtail crude production starting January 1 soared Monday as oil price differentials plunged. It said 90 per cent of its oil production is either in the US, or is downstream of the recent apportionment points which are impacting prices, so it's average selling price hasn't been as impacted as other companies. The cuts are scheduled to end on December 31, 2019.

Alberta's intervention also comes just after a sharp nosedive in global oil prices last month, prompting the Organization of Petroleum Exporting Countries to consider cutting as much as 1.3 million barrels per day of production, according to news reports.

Suncor said in a statement Monday that price differentials were already narrowing. Alberta crude had been trading at a discount compared to West Texas Intermediate, the North American benchmark, for months, due to a surplus of inventory.

"Between now and next winter the Western Canadian oil market is at the mercy of rail schedulers and their attempts to mobilize more locomotives, tank cars, and trained crews-an effort that has thus far proved insufficient to clear the market".

At least one oil company in Saskatchewan agrees with the provincial government's decision to not make cuts to oil production. "We need Ottawa's full attention", Notley said prior to a cabinet meeting Monday morning.

Oil prices slumped by around 2 percent on Wednesday, pulled down by swelling US inventories and a plunge in global stock markets as China's government warned of increasing economic headwinds.

It costs about $22 to ship crude via rail from Alberta to the Gulf, market sources told Reuters. Construction is underway on Enbridge Inc's Line 3 pipeline replacement from Alberta to the United States, with the project expected to be in service by the end of 2019.

They said the current agenda does not include any discussion of a crisis facing the energy industry. However, Imperial and Husky said Friday they remain opposed to involuntary production cuts.

Still, MacNaughton says he has reached out to his counterpart Kelly Craft to emphasize the cuts are only temporary and that Canada does not feel they violate existing free-trade rules. That's on top of mounting concern that the country's regulatory framework makes it very hard to get much-needed pipeline projects approved.

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