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Alberta to end oil production limits in December

Jeff Lagerquist
·2 min read
A worker holds a cup of heavy oil before it is shipped to the market at the Cenovus Energy Christina Lake Steam-Assisted Gravity Drainage (SAGD) project 120 km (74 miles) south of Fort McMurray, Alberta, August 15, 2013. Cenovus currently produces 100,000 barrels of heavy oil per day at their Christina Lake tar sands project. REUTERS/Todd Korol  (CANADA - Tags: ENERGY BUSINESS)
REUTERS/Todd Korol

Alberta’s government is scrapping its monthly limits on oil production in December in a bid to encourage producers to use available pipeline capacity and create jobs.

The decision comes nearly two years after limits were announced by then-premier Rachel Notley. The end of the historic intervention by Alberta’s government comes at a time when the province’s oil producers have limited their output in the face of a demand plunge brought on by the COVID-19 pandemic.

“Maintaining the stability and predictability of Alberta’s resource sector is vital for investor confidence as we navigate the economic conditions brought on by the pandemic, the commodity price crisis and the need for pipelines,” Alberta Energy Minister Sonya Savage said in a release.

Alberta’s oil companies have been producing well below established production limits for several months now due to the COVID-19 pandemic and resulting economic downturn. The provincial government said on Friday that 16 per cent of Alberta's crude oil production remains offline, which is down from 22 per cent from March, when cases of COVID-19 began to rise.

Forecasts show oil inventories are expected to remain low into 2021. The Alberta government said it will closely monitor production, inventories, pipeline capacity and rail shipments to ensure production does not exceed what the province can export.

While the government said it does not plan to resume production limits, it will extend its authority to impose curtailments through December 2021.

“This purposeful approach serves as an insurance policy, as it will allow Alberta to respond swiftly if there is a risk of storage reaching maximum capacity while enabling industry to produce as the free market intended,” Savage said.

She stressed the need for pipeline projects, including Keystone XL, the Trans Mountain expansion, and Enbridge Line 3, to move ahead in order to maximize the long-term value of Alberta’s natural resources.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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