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Vol. 25, No.14 Week of April 05, 2020
Providing coverage of Alaska and northern Canada's oil and gas industry

Alberta’s Kenney seeks joint action with US

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Looking to combat ‘predatory dumping’ of Saudi crude; says ‘unfriendly dictatorships’ out to destroy continental energy sector

Gary Park

for Petroleum News

Alberta Premier Jason Kenney, faced with what he calls a “contraction” without precedent in his province’s oil industry, has reached out to the U.S. government, congressional leaders and governors from oil-producing states to explore a “coordinated action” to end the price war between Saudi Arabia and Russia.

“If the Saudis and Russians continue this foolishness in the midst of a crash in demand, you will see these kinds of catastrophically low prices for some time,” he said.

Kenney said options that could be explored include tariffs on North American oil imports, a closed U.S.-Canadian oil market that bars shipments of crude from outside the continent, an investigation into dumping activity by OPEC and possible production curtailment.

“We cannot allow the Saudis and Russians to effectively run us out of business,” he said. “We cannot let them win.”

Given that Alberta accounts for only 3% of global production, Kenney conceded his province could be sideswiped by U.S. action to defend its own oil sector.

He is thus anxious to work in harmony with the U.S. government and industry.

Western Canadian Select below US$4

His plea for attention from the U.S. occurred on the same day that Western Canadian Select, the heavy oil benchmark in Canada, dipped below US$4 a barrel - US$3 a barrel below the average costs of shipment and, as those still able to muster a light-hearted view observed, less than a cup of coffee or a pint of beer.

The consulting firm of Rystad Energy said more than 75% of Western Canada’s storage capacity has been filled, forecasting that producers in the region will need to cut output by 440,000 barrels per day by April.

Although Kenney is unwilling to order production cuts over the 8.7% imposed a year ago that has been eased by 250,000 bpd, he noted that market forces are leading companies - including Suncor Energy and Husky Energy - to voluntarily shut-in output.

Mark Oberstoetter, an analyst with Wood Mackenzie, said every project in Alberta is losing money and even if Brent crude prices average US$35 a barrel in 2020 corporate cash flows in the oil sands would be US$17 billion in the red.

Mike Walls, a senior analyst with Genscape, said oil demand in the U.S. could slide by up to 3 million bpd.

“Every single crude grade and type is being hit by this, but Canada is being hit especially hard,” he told the Calgary Herald.

Kenney managed a shred of hope, suggesting that “once we get through (COVID-19) and see demand return, at some point ... we may want to pursue something like a coordinated approach to curtailment of production across North America.”

“What I’m trying to do is remind our partners in Washington and Texas is that we must be partners on a North American basis,” he said.



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