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Researched by Industrial Info Resources (Sugar Land, Texas)--On Sunday, Alberta premier Rachel Notley announced that oil production in the province would be curtailed starting January 1. Western Canadian Select (WCS) crude oil currently trades for a steep discount to the North American benchmark, West Texas Intermediate (WTI), and it is hoped that reducing production from the oil-rich province will elevate WCS' price. The province suffers from a lack of takeaway pipeline capacity, helping cause the lower price. Industrial Info is tracking more than $94 billion in active Production projects in Alberta, many of which may be postponed due the planned production reduction.
Click on the image at right for a look at Oil & Gas Production projects planned to kick off in Alberta in 2019/
The province's plan calls for a reduction of 8.7% beginning January 1, which gradually will be eased as 2019 progresses. Output initially would be reduced by 325,000 barrels per day (BBL/d), and this is expected to drop to 95,000 BBL/d by the end of the year. To ensure small producers are not affected disproportionately, there will be a 10,000-BBL/d exemption. The government of Alberta estimates about 25 producers will have to make cuts. Notley called the reduction a "short-term measure."
Among Alberta's major producers that had called for a curtailment was Cenovus Energy Incorporated (NYSE:CVE) (Calgary, Alberta). Among the oil production projects under construction in Alberta is Cenovus' oil sands plant addition at its Christina Lake facility. The project entails constructing a 50,000-BBL/d bitumen processing plant and expanding the steam-assisted gravity drainage (SAGD) gathering field to increase production capacity to 228,000 BBL/d. Construction on the project kicked off in early 2017 and is expected to be completed in the first half of next year, in the midst of the production curtailment. Vista Projects Limited (Calgary) is providing engineering, procurement and construction. For more information, see Industrial Info's project report.
Other producers, such as Suncor Energy Incorporated (NYSE:SU) (Calgary), which operates refineries in the U.S. and Canada, spoke out against the imposed production reduction. In a press release, the company said, "Suncor believes the market is the most effective means to balance supply and demand and normalized differentials. Less economic production was being curtailed, and differentials were narrowing as a result of market forces." Among Suncor's planned projects was the Stage 5 expansion of its Firebag facility near Fort McMurray, Alberta. The project would expand production capacity by 63,000 BBL/d to 332,000 BBL/d. The project is planned to kick off next summer, taking about a year to complete. For more information, see Industrial Info's project report.
Among the reasons for the low price of WCS is a lack of pipeline takeaway capacity. The result of this lack of takeaway is that the province has about 35 million barrels of oil in storage.
Among the projects planned to move more crude out of Alberta is the expansion of the Trans Mountain Pipeline, which would move crude to British Columbia for export to Asian markets. The project would expand Trans Mountain's capacity from 300,000 BBL/d to 890,000 BBL/d. However, the project has faced many challenges. Former project owner Kinder Morgan Canada Limited (TSX:KML) (Calgary) had waivered on the project after facing challenges, particularly from British Columbia, resulting in a trade war between the two provinces. In late August, the project was sold to the government of Canada. Despite having been approved by Canada's National Energy Board (NEB) in 2013, in August, after the sale to the government had been approved, Canada's Federal Court of Appeal overturned NEB's approval of the expansion, stating that it had not sufficiently consulted First Nations groups and assessed the project's environmental impact. For more information, see Industrial Info's project reports on the Alberta and British Columbia sections.
Another project designed to increase Alberta's takeaway capacity is Enbridge Incorporated's (NYSE:ENB) (Calgary) $7 billion Line 3 replacement project, which will upgrade the existing pipeline between Hardisty, Alberta, and Superior, Wisconsin, in order to carry more crude. The project is expected to go into service late next year. For more information, see Industrial Info's project report on the Alberta section of the pipeline.
In order to compensate for the lack of pipelines, the province last month announced plans to purchase up to 80 locomotives and 7,000 rail tankers to move crude to markets. The first of these shipments is expected in late 2019. The government said the extra rail capacity would allow Alberta to transport 30% more crude by rail than current levels, reducing the WCS price differential by about $4 per barrel.
According to the U.S. Energy Information Administration, refineries in the U.S. Midwest process most of the Canadian crude shipped to the U.S. Midwest refineries processed 2.4 million BBL/d of Canadian crude in 2017, accounting for nearly 60% of all of Canada's crude oil production that year. Recent low refinery utilization rates in the region helped dry up the market for WCS, sais the EIA, which reports that the region's refinery utilization for the week ending October 26 was 73%, the lowest since 1985.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Click on the image at right for a look at Oil & Gas Production projects planned to kick off in Alberta in 2019/The province's plan calls for a reduction of 8.7% beginning January 1, which gradually will be eased as 2019 progresses. Output initially would be reduced by 325,000 barrels per day (BBL/d), and this is expected to drop to 95,000 BBL/d by the end of the year. To ensure small producers are not affected disproportionately, there will be a 10,000-BBL/d exemption. The government of Alberta estimates about 25 producers will have to make cuts. Notley called the reduction a "short-term measure."
Among Alberta's major producers that had called for a curtailment was Cenovus Energy Incorporated (NYSE:CVE) (Calgary, Alberta). Among the oil production projects under construction in Alberta is Cenovus' oil sands plant addition at its Christina Lake facility. The project entails constructing a 50,000-BBL/d bitumen processing plant and expanding the steam-assisted gravity drainage (SAGD) gathering field to increase production capacity to 228,000 BBL/d. Construction on the project kicked off in early 2017 and is expected to be completed in the first half of next year, in the midst of the production curtailment. Vista Projects Limited (Calgary) is providing engineering, procurement and construction. For more information, see Industrial Info's project report.
Other producers, such as Suncor Energy Incorporated (NYSE:SU) (Calgary), which operates refineries in the U.S. and Canada, spoke out against the imposed production reduction. In a press release, the company said, "Suncor believes the market is the most effective means to balance supply and demand and normalized differentials. Less economic production was being curtailed, and differentials were narrowing as a result of market forces." Among Suncor's planned projects was the Stage 5 expansion of its Firebag facility near Fort McMurray, Alberta. The project would expand production capacity by 63,000 BBL/d to 332,000 BBL/d. The project is planned to kick off next summer, taking about a year to complete. For more information, see Industrial Info's project report.
Among the reasons for the low price of WCS is a lack of pipeline takeaway capacity. The result of this lack of takeaway is that the province has about 35 million barrels of oil in storage.
Among the projects planned to move more crude out of Alberta is the expansion of the Trans Mountain Pipeline, which would move crude to British Columbia for export to Asian markets. The project would expand Trans Mountain's capacity from 300,000 BBL/d to 890,000 BBL/d. However, the project has faced many challenges. Former project owner Kinder Morgan Canada Limited (TSX:KML) (Calgary) had waivered on the project after facing challenges, particularly from British Columbia, resulting in a trade war between the two provinces. In late August, the project was sold to the government of Canada. Despite having been approved by Canada's National Energy Board (NEB) in 2013, in August, after the sale to the government had been approved, Canada's Federal Court of Appeal overturned NEB's approval of the expansion, stating that it had not sufficiently consulted First Nations groups and assessed the project's environmental impact. For more information, see Industrial Info's project reports on the Alberta and British Columbia sections.
Another project designed to increase Alberta's takeaway capacity is Enbridge Incorporated's (NYSE:ENB) (Calgary) $7 billion Line 3 replacement project, which will upgrade the existing pipeline between Hardisty, Alberta, and Superior, Wisconsin, in order to carry more crude. The project is expected to go into service late next year. For more information, see Industrial Info's project report on the Alberta section of the pipeline.
In order to compensate for the lack of pipelines, the province last month announced plans to purchase up to 80 locomotives and 7,000 rail tankers to move crude to markets. The first of these shipments is expected in late 2019. The government said the extra rail capacity would allow Alberta to transport 30% more crude by rail than current levels, reducing the WCS price differential by about $4 per barrel.
According to the U.S. Energy Information Administration, refineries in the U.S. Midwest process most of the Canadian crude shipped to the U.S. Midwest refineries processed 2.4 million BBL/d of Canadian crude in 2017, accounting for nearly 60% of all of Canada's crude oil production that year. Recent low refinery utilization rates in the region helped dry up the market for WCS, sais the EIA, which reports that the region's refinery utilization for the week ending October 26 was 73%, the lowest since 1985.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
