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Alberta boosts output to 3.75 million bpd
Increases production limit from 3.53 million bpd in January, answering pleas by some operators, but investor confidence remains low Gary Park for Petroleum News
The Alberta government has answered a plea by some of its biggest crude producers by again easing its production limits.
The move will raise the September output ceiling to 3.76 million barrels per day from 3.53 million bpd in January when the province imposed a targeted reduction of 325,000 bpd in a bid to shrink the widening price gap between Western Canada Select and West Texas Intermediate that peaked at around US$40 a barrel in late 2018 and is now under US$20.
A news release said Energy Minister Sonya Savage had sent ministerial orders to all affected operators, announcing that only 29 of more than 300 producers in the province are now subject to the production cuts.
Increased CBR cited The government said increased movement of crude-by-rail, declining volumes in storage and improved efficiencies in export pipelines had allowed it to raise volumes.
Suncor Energy and Cenovus Energy said they have been trying to get the government to let them exceed their current quotas in return for a commitment to ship the extra volumes to market by rail. Husky Energy also said it has submitted proposals to the government to loosen curtailments.
Suncor Chief Executive Officer Mark Little said he expects that over the remainder of 2019 “we could bring on somewhere in the neighborhood of 250,000 to 300,000 bpd of incremental rail” shipments.
Discussion on contracts In addition, the government said it has embarked on talks with the industry for the private sector to take over C$4 billion worth of crude-by-rail shipping contracts that were signed by the previous administration of Premier Rachel Notley.
Suncor and Cenovus both said that reducing the production limits would make those rail contracts more attractive to producers.
Suncor’s total output climbed to a second-quarter record of 803,900 barrels of oil equivalent per day, up 21% from a year earlier and allowed the company to generate about C$3 billion in funds from operations.
Dropping rig forecast But whatever optimism is generated by the latest shift in government production quotas, the outlook for 2019 rig activity is continuing to sag, according to RBD Dominion Securities analysts.
They have cut their forecast for Canadian rig activity and well counts by 6% to 8% and expect a further reduction of 5% to 6% in 2020.
The analysts said their estimates reflect a slow start to the third quarter owing to wet weather in Western Canada and slower producer spending due to softer commodity price forecasts.
John Bayko, a spokesman for the Canadian Association of Oilwell Drilling Contractors, said there is an overall lack of investor confidence in Canadian oil and natural gas that has been compounded by federal government legislation to revamp the regulatory process for approving new projects and the ban on oil tankers operating off British Columbia`s northern coast.
CAODC said that in late July 146 drilling rigs were working or relocating in Canada out of an available fleet of 547 rigs, compared with an average 264 rigs in July 2018.
Based on an average 135 jobs for each rig that translates into almost 16,000 fewer people currently working in the industry.
Bayko said many oilfield workers have left the sector, although some have jobs in the United States on the 29 Canadian rigs that have been moved south since 2017.
He said steady work has not been available in Canada for almost five years.
RBC said the average Western Canadian count for active rigs for the second quarter - normally the slowest season - was 90 this year, down 23% from a year earlier.
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