(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.

Just Posted

Advance polls ‘very busy’ over the weekend in Williams Lake, says Federal election official

Residents still have all day Tuesday to cast their ballot in advanced polls in Williams Lake

GoFundMe started after fire leaves Ruth Lake cabin severely damaged

‘The fire hit hard and fast - he lost everything’

Fire Prevention Week: Practise makes perfect at Horsefly fire department

The Horsefly Volunteer Fire Department has been operating since 1993

Fire Prevention Week: Big Lake Volunteer Fire Department proud to serve the community

The Big Lake Volunteer Fire Rescue covers a vast area of 522 square kilometers

B.C.’s rural paramedic program expands, with home support

Advanced care ambulance staff added for six communities

BC Ferries sees steady traffic of post-Thanksgiving weekend travellers

Ferries filling up fast, sailing waits at some terminals

‘Save the kids!’ Dorian survivor tells the harrowing story of his Canadian wife’s death

Family held a funeral and placed Alishia Liolli’s remains in a niche at a cemetery in Windsor, Ont.

Okanagan woman, 91, votes at advance polls despite broken hip, shoulder and wrist

Angela Maynard has voted in almost every election during her lifetime

Heiltsuk Nation open first Big House in 120 years in northern B.C.

Opening means the community now has an appropriate space for spiritual and ceremonial events

Singh says NDP would form coalition with the Liberals to stop Tories

Singh was in a Liberal-held riding Sunday afternoon in Surrey where he was pressed about his post-election intentions

‘My heart goes out to the mother’: B.C. dad reacts to stabbing death of Ontario boy

Carson Crimeni, who was also 14, was bullied relentlessly, his dad says

BC Ferries filling up fast with post-Thanksgiving weekend travellers

Monday anticipated to be busiest day of the weekend

‘Wham-bam out the door’: Surrey man’s front yard left ruined by scamming landscaper

Resident warns neighbours to be careful of door-to-door salesmen

Most Read