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Facing Storage Glut, Alberta Government Cuts Oil Output; Canadian Operators React

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   |    Wednesday,December 05,2018

Alberta Premier Rachel Notley announced that the province will cut down on its oil/bitumen production.

The production of raw crude oil and bitumen will be reduced by 325,000 barrels per day to address the storage glut, representing an 8.7% reduction. After excess storage is drawn down, the reduction will drop to an estimated average of 95,000 barrels a day until Dec. 31, 2019.

The Alberta Energy Regulator will implement the reductions starting in January 2019.

This development comes shortly after Notley announced that it plans to purchase rail assets in an attempt to bolster the export of Alberta oil and gas resources.

Companies Affected

There will be numerous companies affected by this decision, including Suncor, CNRL, Imperial Oil, Cenovus and more (see chart below).

Imperial Oil CEO Rich Kruger voiced his opposition to the decision, commenting: "This intervention appears not to recognize the investment decisions companies have made to access higher value markets."

Suncor also announced that it is "assessing the impact" of the Alberta government's decision to curtail production.

This move will likely affect 2019 budgets for numerous Canadian companies. For example, CNRL unveiled its 2019 plans, which feature a noticeably lower capex and well program compared with 2018. Additionally Gibson Energy has debuted a lower 2019 capital budget and Cenovus CEO Alex Pourbaix noted that his company's spending levels will likely be flat compared to 2018.



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