Alberta eases oil production limits
February 6, 2019 By Government of Alberta
As storage levels draw down and the value of Alberta’s oil increases, the province is increasing the limit on oil production.
Premier Rachel Notley’s decision to protect the value of Alberta’s oil has been instrumental in helping reduce the amount of oil in storage, which had been nearly twice the normal level and resulted in the resources owned by all Albertans being given away for pennies on the dollar.
In response to new storage data, Alberta is increasing production in February and March to 3.63 million barrels per day, which is a 75,000-barrel per day increase from the January limit of 3.56 million barrels per day.
“We’re not out of the woods yet, but this temporary measure is working. While it hasn’t been easy, companies big and small have stepped up to help us work through this short-term crisis while we work on longer-term solutions, like our investment in rail and our continued fight for pipelines. I want to thank Alberta producers for working with us to protect the jobs and livelihoods of thousands of Alberta families and businesses, and your cooperation has been key to easing these limits ahead of schedule,” said Notley.
Alberta’s goal has always been to match production levels to what can be shipped using existing pipeline and rail capacity, while encouraging a reduction in storage levels. The decision to temporarily limit oil production was applied fairly and equitably, and has been instrumental in saving jobs across the energy sector.
Since the production limit was announced in December 2018, storage levels in Alberta have dropped ahead of schedule, declining by five million barrels to a total of 30 million barrels in storage. Analysis based on independent data suggests storage levels have been decreasing roughly one million barrels per week since the start of 2019 and are on track to continue clearing the storage glut that led to unprecedented discounts for Alberta oil in late 2018.
“I will never stop fighting for Albertans and Canadians to get top dollar for the resources that belong to them. We will adjust these production levels as necessary going forward and we will not waver in our fight for a Made-in-Alberta strategy to build new pipelines, access new markets and add value that creates jobs by upgrading more of our oil and gas here at home,” said Notley. .
Based on the Q1 2019 forecast of production, government announced on Dec. 2, 2018 a reduction in production of 325,000 barrels a day of raw crude oil and raw bitumen. That 325,000 bpd was established as the difference between pipeline and takeaway capacity of 3.56 million barrels a day and the Q1 2019 publicly stated industry-wide forecast production of 3.89 million barrels a day.
The first 10,000 barrels per day a company produces remains exempt from any production limits, meaning 28 of over 300 producers in Alberta are subject to the production limits.
Since the production limits were introduced, government has amended its formula for determining how to allocate space under the production limit. It was determined that starting in February government would use each company’s highest level of production during their best single month from November 2017 to October 2018 as its baseline production level. This was a change from the original formula where the baseline would be established on a company’s highest six-month average over the same time period.
This change was made after listening to concerns from industry and advice from the Alberta Energy Regulator to better account for companies that were in the process of ramping up production as part of long-term investments in the province.
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