The Canadian oil-producing province of Alberta will increase crude production limits by 25,000 barrels per day (bbl/d) in May and a further 25,000 bbl/d in June, the government said on March 18.
The increases mean that by June, oil companies will be limited to 3.71 million barrels per day (MMbbl/d) of production.
Alberta mandated production cuts this year to ease congestion on export pipelines that resulted in crude getting bottlenecked in storage and the discount on Canadian heavy crude widening to record levels.
"This temporary policy has been critical to reducing the oil price differential while we move ahead with our medium-term plan to ship more oil by rail and lead the long-term charge for new pipelines as we fight to get full value for the resources owned by all Albertans,” Premier Rachel Notley said in a statement.
The government said the increase in production limits comes as warmer weather reduces the amount of diluent needed to help oil sands bitumen flow through pipelines, increasing capacity.
Diluent is any ultra-light hydrocarbon mixed with viscous bitumen to enable it to flow.
The government said giving production limits two months in advance gives the energy industry and markets greater certainty when making decisions.
Some producers like MEG Energy supported curtailments because the move boosted prices, but it was criticized by integrated producers including Suncor Energy and Imperial Oil whose refining operations were benefitting from cheap crude.
Critics also blasted the government for making crude by rail shipments uneconomic and adding to volatility in the Canadian crude market.
On March 15, Imperial canceled a $2.6 billion oil sands project in northern Alberta, blaming the uncertainty caused by government intervention in the market.
Alberta is leasing 4,400 rail cars to ship 120,000 bbl/d of crude out of the province and ease pipeline congestion, with the first shipments due to begin in July.
The latest production limit increase comes the same day Alberta opened its final legislature session before a provincial election that polls suggest will see Notley's left-leaning government cede power to the United Conservative Party.
Recommended Reading
Permian M&A: Oxy Shops Delaware Assets, Family Oil Cos. Stand Out
2024-05-12 - As operators scour the Permian Basin for M&A opportunities, they’re keeping an eye on a tepid divestiture market. Family-owned oil companies also stand out among the pack of private inventory holders remaining in the Permian, according to Enverus Intelligence Research.
GeoPark, Vitol Sign Offtake Deal for Llanos 34 Block
2024-05-12 - Under the agreement, GeoPark will sell and deliver to Vitol a minimum of 20,000 bbl/d of oil from the Llanos 34 Block in Colombia, which GeoPark holds 45% working interest.
Magnolia Bolts-on 27,000 Acres in South Texas’ Giddings Field
2024-05-09 - Magnolia Oil & Gas said it paid $125 million to a private operator to acquire the acreage, which has minimal production.
Tetra Tech Acquires Convergence Controls & Engineering
2024-05-09 - Tetra Tech is acquiring Convergence Controls & Engineering to expand its digital water and energy offerings.
Kinetik Launches Delaware Basin M&A Valued at $1.3B
2024-05-09 - Kinetik Holdings will buy Durango Permian infrastructure for $765 million, excluding contingency payments, and sell its interests in the Gulf Coast Express pipeline to AcrLight Capital Partners for $540 million.