(Canadian Press)

Alberta cuts oil production to help deal with low prices

Alberta Premier Rachel Notley says as of January there will be an 8.7 per cent reduction ordered in oil production

Alberta Premier Rachel Notley is ordering a mandatory cut in oil production to deal with a price crisis that she says is costing Canada an estimated $80 million a day.

Notley says as of January there will be an 8.7 per cent reduction ordered in oil production.

Output of raw crude oil and bitumen will be reduced by 325,000 barrels per day. That figure is expected to shrink as a glut of oil in storage is reduced.

The mandated cut ends on Dec. 31, 2019 and will be spread among all producers in an effort to stave off massive job losses.

READ MORE: Alberta buying its own rail cars to move oil

Notley says the action is necessary to reverse the widening price differential that she said could cause further harm to Alberta’s economy if not addressed immediately.

Alberta’s oil is selling at markedly lower rates compared with the North American benchmark, due in part to oil pipeline bottlenecks.

“In the last few weeks, this price gap has reached historic highs because we are producing considerably more product than there is transport capacity,” Notley said in a speech timed to run live on supper-hour newscasts in Alberta.

“This is creating a huge backlog and forcing the price of our oil to ridiculously low levels…. We are essentially giving our oil away for free.”

Roughly speaking, Notley said, while the rest of the world sells its oil at about $50 per barrel, Alberta fetches only $10.

READ MORE: Oil and gas commission investigating earthquakes in northeast B.C.

The announcement is expected to narrow the differential by at least $4 per barrel and add an estimated $1.1 billion to government revenues in 2019-2020.

The premier has already said the province will buy as many as 80 locomotives and 7,000 rail tankers — expected to cost hundreds of millions of dollars — to move the province’s excess oil to markets, with the first shipments expected in late 2019.

But she has said that rail cars, along with eventually increasing domestic refining capacity and building new pipelines, won’t bring relief soon enough.

“We must act immediately,” Notley said Sunday.

The Opposition United Conservatives and the centrist Alberta Party had already called for the production cut. Notley thanked them both in her speech.

Industry feelings prior to the announcement had been mixed.

Cenovus Energy proposed the idea of a production cut last month. However, Imperial and Husky said Friday they remain opposed to involuntary production cuts.

The move is not unprecedented — in 1980, Tory premier Peter Lougheed forced oil production cuts to protest the federal Liberals’ national energy program.

The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Hitched Wedding and Event Affair is a busy affair

This year Hitched is happening at the Comox Community Centre.

Campbell River Storm topple Oceanside Generals 6-3 in home victory

Storm goals scored by six different players

Teal Harle wraps up X Games appearance with personal bests

Finished 12th in ski big air, 11th in ski slopestyle

Decor details: Professional rental and design businesses deliver it all

Stop by the Comox Community Centre today from 11 a.m. to 4 p.m.!

Burger and a beer for a cause? Yes, please.

John Howard Society hopes Feb. 3 fundraiser at Match will sponsor one child in KidStart

WATCH: Find a perfect venue at Hitched Wedding & Events Affair

Check out vendors, venues and more at the Comox Community Centre today until 4 p.m.

Canada’s basketball community mourns Kobe Bryant after helicopter crash

Bryant was an 18-time NBA all-star who won five championships

‘Devastated’: Fans, celebrities remember Kobe Bryant after his death

Bryant played all of his 20-year career with the NBA with the Los Angeles Lakers

Investigation launched after six dead puppies dumped in Richmond hotel parking lot

RAPS reminds people they can always give up puppies they can’t take care of

Canadian Lunar New Year celebrations dampened by coronavirus worries

But Health Minister Patty Hajdu said today that the risk of infection is low

B.C. VIEWS: New coronavirus outbreak an important reminder

Walking the line between cautious and alarmist

Kobe Bryant, daughter killed in California helicopter crash

Bryant entered the NBA draft straight out of high school in 1996

Risk of coronavirus low in B.C. as first case emerges in Toronto: officials

There have been no confirmed cases of the virus in B.C.

Most Read