Imperial Oil slams Notley's cuts as 'negative message to investors'

Imperial Oil slams Notley's cuts as 'negative message to investors'

On Monday, the Saskatchewan government announced it would not be following Alberta's plan to cut oil production in an effort to reduce the punishing price differential plaguing energy producers.

Cutting production: The province has ordered the output of raw crude oil and bitumen to be reduced by 8.7 per cent, or 325,000 barrels per day, starting in January.

The price discount between Western Canadian Select (WCS) and West Texas Intermediate (WTI) has fluctuated in recent weeks, reaching around C$45 a barrel.

Alberta now produces 190,000 barrels a day more than can be shipped and has twice the normal levels of oil in storage - a total of 35 million barrels.

Moe said that while he agrees there is an unacceptably high differential for Alberta oil, "a government-mandated production cut in Saskatchewan could result in a loss of jobs and economic activity in our province, but would have little impact on the price of oil because it would disproportionately impact conventional oil production, which is not the problem".

Alberta needs new pipelines to expand its export options for its growing oil sands production.

In an emailed statement, the company said that while it will comply with the production cuts in Alberta, it doesn't think it's the right call.

The government of Alberta is taking action to ease a regional glut of oil brought on by the continued delays of much-needed oil pipeline projects.

In early trading Monday, Cenovus Energy Inc. rose as much as 13 per cent over its Friday close to $11.11, while Canadian Natural Resources Ltd. rose as much as 16 per cent to $38.74.

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Canada's heavy-oil benchmark surged after Alberta announced its crude production cuts - and prices should see "further improvement" in the coming years, according to a research note. That gap hit around $50 in late October due to a lack of pipeline capacity to get Alberta oil to market.

"As proposed, the meeting agenda does not include any discussion on the crisis facing the energy industry and the price differential that is crippling the Alberta, Saskatchewan and Canadian economies".

The bounce helps to explain the Canadian dollar strength today. The monthly curtailment levels will be provided through an order that will expire at the end of 2019, and the Alberta Energy Regulator will be tasked with implementing the system. "This is a short term measure", Notley said.

But he said Notley's government has played a role in creating the problem by not pushing back as the federal government cancelled the Northern Gateway pipeline to B.C. and introduced legislation that industry leaders say will make it more hard to get oil megaprojects approved.

Above: Price of Central Alberta blend of oil.

However, he says we should turn our eyes to the world stage.

Energy Minister Marg McCuaig-Boyd said if Saskatchewan had chose to curtail oil, it wouldn't have changed Alberta's path forward.

The move is not unprecedented - in 1980, Tory premier Peter Lougheed forced oil production cuts to protest the federal Liberals' national energy program.

"What's good for the residents is that if we can get more money for our oil and for our gas, it'll be more money in the civic offers, which we've in the past have used as a dividend for property taxes or to build things like the Leisure Centre or Event Centre", Clugston added.

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