Alberta is increasing the oil curtailment limit from 10,000 to 20,000 barrels per producer per day, and extending the program to December 2020.
The policy, which was originally implemented by the previous NDP government in January to correct an oversupply of oil in the province, was initially supposed to end this December.
The new UCP government cited factors like the Line 3 pipeline delay as contributing to its decision.
“While curtailment is far from ideal, under the current context it is necessary,” Energy Minister Sonya Savage said in Calgary on Tuesday. “But we have to do this in the short term because of a lack of pipeline capacity.”
Savage said the extra time will offer greater market certainty, and the increased limit will aid smaller producers without having a significant impact on overall provincial output.
It will reduce the number of producers affected from 29 to 16, out of a total of 300, Savage said.
The new limits will take effect in October, with monthly raw crude and bitumen limits as follows:
- 3.74 million barrels per day in August.
- 3.76 million barrels per day in September.
- 3.79 million barrels per day in October.
Without curtailment, production is still expected to exceed takeaway capacity by 150,000 barrels per day.
The government’s crude-by-rail contract, had it not been cancelled, would have added an estimated 120,000 barrels per day in takeaway capacity.
Savage said the province is still in the process of divesting those contracts to the private sector.
The minister also said the extension doesn’t mean curtailment will necessarily last another year, but that it will give the government space to weather any wild swings in the price differential.