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By Chris Brown

Ending as of December

Province to lift oil production limits

Oct 23, 2020 | 8:59 AM

Monthly oil production limits in Alberta will come to an end as of December, the provincial government says.

In a release, the province says that only 16 per cent of Alberta’s crude oil production remains offline, compared to 22 per cent at the start of the COVID-19 pandemic. The move will allow producers to utilize available pipeline capacity and create jobs.

The government will extend its regulatory authority to curtail oil production until December of next year, though at this time there are no plans 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,” says Energy Minister Sonya Savage. “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.”

Production limits have been in place since January 2019 in an effort to protect the value of the province’s oil. The limits were intended as a short-term measure but were extended following delays in getting pipeline projects built.

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Production, inventories, pipeline capacity and rail shipments will be closely monitored by the government to ensure that production does not exceed what the province can export. The province goes on to say that current forecasts show that inventories are expected to remain low, with sufficient export capacity to allow the system to operate efficiently on its own well into 2021.

Quick facts

• In August, Alberta production was 3.10 million barrels per day, significantly less than the 3.81 million barrels per day curtailment limit.
• According to Genscape, as of Oct. 16 inventories were at about 20 million barrels. When production limits were introduced in January 2019, inventories were approaching 40 million barrels.
• Due to the economic effects of COVID-19, experts do not expect production in Western Canada to be above pipeline capacity before mid-2021 at the earliest, and rail and storage inventories are expected to remain low.
• Prior to COVID-19, government had planned to exit curtailment by the end of 2020 provided export routes were in place, including the completion of Enbridge Line 3. Enbridge is proceeding with the final permitting process in the U.S. and estimates Line 3 will be in service in 2021.