The Alberta government is allowing new conventional oil wells without restrictions on production, but existing producing wells will remain under curtailment.
The government says the measure will drive positive investment, lead to increased drilling activity and support economic growth in communities across Alberta.
“Companies are currently making investment decisions and we want those dollars and jobs to be in Alberta. We are doing everything we can to help,” said Energy Minister Sonya Savage in a statement.
The government said these adjustments provide flexibility for industry while aligning with the objective of curtailment – protecting the value of Alberta’s oil by maintaining a balance between production and takeaway capacity.
In September, Alberta produced approximately 480,000 barrels a day of conventional oil. Of this, 90,000 barrels per day were from curtailed operators, said the province, adding that according to the Canadian Association of Oilwell Drilling Contractors, each working drilling rig supports an additional 145 direct and indirect jobs.
“Alberta produced more crude oil in 2018 than could be shipped for export by rail or pipeline. This affected storage levels, Canadian crude oil prices and other aspects of the market. To protect the value of our oil, the government of Alberta temporarily limited production to match export capacity to prevent Canadian crude from selling at large discounts. Due to continuing pipeline delays, oil production limits remain necessary through 2020. The curtailment policy has also been adjusted to give industry more flexibility to make timely business decisions and reduce red tape for small producers,” said the government.
The oil production limit has been extended to Dec. 31, 2020, with possible earlier termination. Monthly production limits for raw crude and bitumen were set at:
- October: 3.79 million barrels per day
- November: 3.80 million barrels per day
- December: 3.81 million barrels per day
A recent report by the Petroleum Services Association of Canada indicated the association has decreased its forecast for the number of wells expected to be drilled across Canada for this year.
In its third update to its 2019 Canadian Drilling Activity Forecast, PSAC revised its number from 5,300 (May 2019 revision) to 5,100 wells drilled. PSAC now projects 2,425 wells to be drilled in Alberta, down from 3,532 in the original forecast.
“Compared to last year, the total number of wells expected to be drilled is lower by 31 per cent. These are levels not seen since the lows of 2015 and 2016 at the onset of the downturn,” said PSAC president and CEO Gary Mar.
“It is clear that our industry continues to face challenges for a healthy recovery. News of the Trans Mountain pipeline expansion being approved for a second time following its purchase by the government of Canada has not restored investor confidence in Canada. Concerns remain that it will be built in a timely fashion to open market access beyond the U.S., and with the passage of Bills C-69 and C-48 by the federal government, support for this industry at all in Canada is in question. For the first time in Canada, sovereign risk is an issue.
“On the provincial front in Alberta, while optimism is evident with a new government in office, curtailment of oil production remains in place and continues to be a factor against new investment.”
Mario Toneguzzi is a veteran Calgary-based journalist.
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