An oil drill pump (rdnewsNOW)

By Justin Goulet

Province to remove cap on crude oil production by year’s end

Oct 23, 2020 | 8:48 AM

EDMONTON, AB – The Government of Alberta is lifting oil production limits by the end of this year.

The province says this will allow producers to utilize available pipeline capacity and create jobs.

While the government will extend its regulatory authority to curtail oil production through December 2021, it will not set production limits due to 16 percent of Alberta’s crude oil production remaining offline and down from 22 percent at the start of the pandemic.

As of now, the province does not plan to resume production limits.

“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,” said Minister of Energy, Sonya Savage.

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“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.”

The government plans to continue pressing for the timely completion of pipeline projects. Since January of 2019, production limits have aligned production with export capacity, which has protected the value of Alberta’s oil by helping Canadian crude from selling at large discounts.

The province says the limits were intended as a short-term measure, however, ongoing delays to pipeline projects have led to the monthly production limits continuing through November 2020.

Delays mean Alberta’s production capabilities still exceed its takeaway capacity, but because of COVID-19 and the resulting economic shutdown, oil companies in the province have been producing well below the established production limits for many months, according to the government.

The province noted that the completion of projects such as the Keystone XL pipeline will enhance Alberta’s permanent ability to balance production and takeaway capacity, helping to ensure the province’s resources are exported at their full value.

Officials will closely monitor production, inventories, rail shipments and pipeline capacity to make sure production does not surpass what the province can export.

Current forecasts suggest that inventories are slated to remain low, with sufficient export capacity to allow the system to operate efficiently on its own into 2021.

Should forecasts display storage inventories approaching maximum capacity, the government could put production limits back in place, giving the industry 30 to 60 days of advance notice to enable companies to plan their production.