Alberta to offload crude-by-rail contracts, raises oil quotas for August

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A flare stack lights the sky from the Imperial Oil refinery in Edmonton on December 28, 2018. The Alberta government says it will ease its oil production curtailment program by 25,000 barrels per day in August. The province is citing growing its crude-by-rail capacity, declining oil inventory levels and improved efficiencies in export pipelines for the move. THE CANADIAN PRESS/Jason Franson

CALGARY — Alberta’s United Conservative government says it will try to offload crude-by-rail contracts signed by the previous NDP government to private companies by this fall, confirming an election promise.

“We have said from the beginning that shipping crude by rail is something that the private sector is in the best position to be doing itself,” Energy Minister Sonya Savage said Thursday.

“Our government is taking the next step in shifting the former government’s crude-by-rail program to the private sector.”

The Alberta Petroleum Marketing Commission has hired CIBC Capital Markets to help oversee the sales, she said.

Premier Jason Kenney told reporters earlier this month at the Global Petroleum Show in Calgary that “confidential conversations” with the private sector were being held and that the province wanted to put the contracts in private hands.

Former premier Rachel Notley announced in February the province would spend $3.7 billion and lease about 4,400 rail cars to move up to 120,000 barrels of Alberta oil per day to market by rail.

The province also announced Thursday it would ease its oil production curtailment program by 25,000 barrels per day in August.

It cited growing crude-by-rail capacity, declining oil inventory levels and improved efficiencies in export pipelines for the move.

Last week, the National Energy Board reported Canadian crude-by-rail exports in April reached 236,000 bpd, a 40 per cent increase over March, but still down from the record high of 353,800 bpd in December.

The new Alberta production limit in August will be 3.74 million bpd, versus the initial January limit of 3.56 million bpd, the province said.

The limits were imposed after discounts on Western Canadian Select bitumen-blend oil jumped to more than US$50 per barrel compared with New York-traded West Texas Intermediate last fall.

The difference is now about US$13.70 per barrel, according to oil brokerage Net Energy Exchange.

The first 10,000 bpd a company produces are exempt from production limits, meaning only 29 of more than 300 producers in Alberta are subject to the limits.

 

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Dan Healing, The Canadian Press

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