Canada's Alberta province orders drastic oil production cuts to fight price crisis
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.
Announcing the measure on Sunday, Premier of Alberta Rachel Notley said that the province is “facing a difficult challenge,” but the move is aimed to reverse an unprecedented price gap that has seen the province’s crude sell for significantly less than the global price.
Alberta currently produces 190,000 barrels a day more than can be shipped and has twice the normal levels of oil in storage – a total of 35 million barrels.
Alberta, we're facing a difficult challenge.But, let me assure you, I will never back down in our fight to protect our jobs, our resources and our province.I will never stop fighting for Alberta.And I will never stop fighting for you.More details here:https://t.co/sQKwenkyeKpic.twitter.com/tiInHQxegV
— Rachel Notley (@RachelNotley) 3 декабря 2018 г.
“If we are going to solve this problem once and for all, the low price era must end. And a high-value era must begin,” Notley said in a statement. She earlier stressed that currently Alberta’s resources are given away “for next to nothing,” referring to the province’s crude selling for around $15 a barrel.
Cutting 325,000 barrels of crude oil and bitumen will be temporary and will be implemented starting January. The government says the reduction will be in force until excess storage is drawn down, after which it will drop to an estimated average of 95,000 barrels a day. The mandated cut ends on December 31, 2019.
The move is expected to raise the price of Canadian crude by at least $4 per barrel and add around $1.1 billion to Alberta government revenues in 2019-2020.
The decision comes on the heels of another measure attempting to resolve the oil price crisis, as Alberta announced plans to purchase trains in order to move oil out of the province.
Not all the producers were happy with the Notley’s order, with critics arguing that the markets can deal better with prices. Imperial Oil CEO Rich Kruger said the government thus “introduced a new risk,” while Husky Energy spokesman Mel Duvall warned the mandatory reduction might have “serious negative investment, economic and trade consequences,” according to local media.
For more stories on economy & finance visit RT's business section
