The Alberta government on Tuesday announced a one-year extension of mandatory oil production cuts to prop up prices through 2020 and counter prolonged pipeline project delays.
“Without curtailment, large discounts for Canadian crude would be projected,” the energy ministry said. The provincial government, which estimates production capacity exceeds pipeline space by 150,000 b/d, has extended the curtailments to Dec. 31, 2020.
The curtailment program extension responds to regulatory delays that continue to hold back 1.8 million b/d in capacity additions planned by the Trans Mountain, Enbridge Inc. and TC Energy Corp. pipeline systems in Canada and the United States.
Alberta output quotas were also announced for late summer and early fall: 3.74 million b/d for August, 3.76 million b/d for September and 3.79 million b/d for October. The quotas have gradually increased from an initial 3.56 million b/d in January 2019.
Revised rules cut the number of companies restrained by the quotas to the top 16 of 300 Alberta producers. Firms with output of less than 20,000 b/d are exempt. The previous cutoff, 10,000 b/d, made 29 producers pull back their wells and plants.
The provincial intervention in the oil market has shown the government’s intention to support Alberta prices, which fell sharply last fall due to a supply surplus piling up behind full pipelines.
Since the curtailment program started eight months ago, prices for Alberta’s benchmark heavy crude, Western Canada Select, have averaged about 20% less than West Texas Intermediate. The discount was more than twice as deep before Alberta adopted production quotas.