(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

Vancouver Police were at a White Rock home Oct. 20 to conduct a search warrant. (Aaron Hinks photo)
ERT response to White Rock home connected to homicide: police

Search underway in the 15800-block of Prospect Crescent

Police tape is shown in Toronto Tuesday, May 2, 2017. (Graeme Roy/The Canadian Press)
CRIME STOPPERS: ‘Most wanted’ for the week of Oct. 18

Crime Stoppers’ weekly list based on information provided by police investigators

Ivan Scott. (Aaron Hinks photo)
Surrey mayor enters word war with speakers, councillor

McCallum calls brief recess after asking two speakers to leave chambers

Signs at a new COVID-19 testing and collection centre at 14577 66th Ave. in Surrey. It was relocated from an urgent primary care centre near Surrey Memorial Hospital. This new centre allows for up to 800 tests per day, which is 550 more than the previous centre, according to Fraser Health. (Photo: Lauren Collins)
Surrey’s COVID-19 case count exceeds 1,800

About 800 new cases in September

Montreal-based writer Michael Foy grew up in the Newton area of Surrey. (submitted photo)
Surrey-raised writer Foy really loves to set his short stories in the city

His latest is published in ‘Canadian Shorts II’ collection

FILE – People wait in line at a COVID-19 testing facility in Burnaby, B.C., on Thursday, August 13, 2020. THE CANADIAN PRESS/Darryl Dyck
167 new COVID-19 cases, 1 death recorded as B.C. enters 2nd wave

Three new healthcare outbreaks also announced

Maple Meadows Station’s new Bike Parkade. TransLink photo
TransLink to remove abandoned or discarded bicycles from bike parkades

Rules at TransLink bike parkades ask customers to use facilities for single day use only

This 2020 electron microscope image made available by the National Institute of Allergy and Infectious Diseases shows a Novel Coronavirus SARS-CoV-2 particle isolated from a patient, in a laboratory in Fort Detrick, Md. THE CANADIAN PRESS/AP-NIAID/NIH via AP
At least 49 cases of COVID-19 linked to wedding in Calgary: Alberta Health

McMillan says the city of Calgary has recently seen several outbreaks linked to social gatherings

UBC geoscientists discovered the wreckage of a decades-old crash during an expedition on a mountain near Harrison Lake. (Submitted photo)
Wreckage of decades-old plane crash discovered on mountain near Harrison Lake

A team of Sts’ailes Community School students helped discover the twisted metal embedded in a glacier

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

The official search to locate Jordan Naterer was suspended Saturday Oct. 17. Photo courtesy of VPD.
‘I am not leaving without my son,’ says mother of missing Manning Park hiker

Family and friends continue to search for Jordan Naterer, after official efforts suspended

A bear similar to this black bear is believed responsible for killing a llama in Saanich on Oct. 19. (Black Press Media file photo)
Bear kills llama on Vancouver Island, prompting concerns over livestock

Officers could not track the bear they feel may not fear humans

RCMP crest. (Black Press Media files)
RCMP cleared in fatal shooting of armed Lytton man in distress, police watchdog finds

IIO spoke to seven civillian witnesses and 11 police officers in coming to its decision

Most Read