Canadian Oil Producer Calls For Production Cap Amid Record Low Prices
One of the large Canadian oil producers, Cenovus Energy, is calling upon the government of Alberta to mandate temporary production cuts at all drillers in a bid to ease Canadian bottlenecks that have resulted in Canada’s heavy oil prices tumbling to a record-low discount of US$50 to WTI.
The province of Alberta, the heart of Canada’s oil sands production, has the necessary legislation to have all producers agree to production cuts and it needs to use it now, Cenovus said in an emailed statement to Bloomberg.
“This is an extraordinary situation brought on by extraordinary circumstances,” Cenovus says.
“The government needs to take this immediate temporary action — which is completely within the law — to protect the interests of Albertans,” the company’s email to Bloomberg reads.
Western Canadian Select (WCS)—the benchmark price of oil from Canada’s oil sands delivered at Hardisty, Alberta—has dropped to a record low discount of US$50 to WTI in recent weeks, due to rising oil production and not enough pipeline capacity to ship the crude out of Alberta.
Due to the record low heavy oil prices, Cenovus Energy is currently operating its Foster Creek and Christina Lake projects at reduced volumes, it said in its Q3 earnings release. On the earnings call, Cenovus Energy’s President and CEO Alex Pourbaix urged the whole Canadian industry to slow down production to ease bottlenecks.
“And I want to be clear on this, the industry right now has a production problem. We’re going to do our part but we are not going to carry the industry on our back. I think this is something that has to be dealt with on an industry wide basis,” Pourbaix said.
Alberta’s Energy Department spokesman Mike McKinnon told Bloomberg in an email, responding to Cenovus’s call for province-wide production cuts:
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