Alberta introduced mandatory oil production curbs on Jan. 1, 2019, to reduce a crude glut that depressed regional prices. It has relaxed some limits to allow for more output and to try and stimulate more drilling and investment.
When the curtailment was begun, Western Canadian Select (WCS) crude oil was selling at a $50-a-barrel discount to U.S. crude oil. The limits have improved selling prices, with the discount to U.S. crude on Wednesday at $21.25-a-barrel for December delivery.
Growth in demand for Canadian crude should increase because of new projects like Enbridge’s Line 3 pipeline replacement which could carry more than 300,000 bpd from Alberta to Chicago in 2021, said Kenney.
Conventional crude accounts for 16% of the province’s oil production, with the vast majority coming from oil sands, according to the Alberta Energy Regulator. Oil sands involve an environmentally hazardous oil-extraction that can involve open-pit mining and require lots of energy.
Earlier this month, Kenney agreed to allow companies to produce additional oil if they move it by rail, which would reduce transport bottlenecks. Alberta could use oil jobs and revenue from new investment, having projected a 2019-20 fiscal year deficit of up to C$8.7 billion ($6.5 billion).
Curtailment was introduced by the previous government in Alberta, and continued by Kenney, who leads the province’s United Conservative Party.
“My citizens – they own that oil,” he said. “I cannot in good conscience allow it to be given away.”
International oil majors have been reducing operations in Canada in favor of investments in the U.S. shale oil fields like the Permian Basin of West Texas and New Mexico.
Kenney’s pitch to U.S. executives on his visit to Houston and Dallas is that the shale boom may prove short-lived, but the supply of crude from Alberta, with its 179 billion barrels of reserves will last a long time.
“We believe the last barrel of oil in a transition economy will likely come from Alberta,” Kenney said.