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Alberta prepares to buy rail cars to increase crude oil shipments



Alberta Premier Rachel Notley delivered a speech in Ottawa on November 28, 2018.

Adrian Wyld / The Canadian Press

Alberta plans to buy railroad cars at the start of the new year to move 120,000 barrels of extra oil per day from the province, considering calls to reduce production to reduce supply of supplies that have pushed Western Canadian oil prices to bid – basement levels.

Premier Rachel Notley is under pressure to look for alternatives to sending Alberta oil amid a lack of capacity in the pipeline. In addition to increasing the volume of trains again, he considered providing incentives – including giving a break for future royalty payments – to companies that agreed to reduce production now. He even saw compulsory production cuts throughout the industry. Such measures will reduce supply in an effort to allow oil market prices to rise again.

In a speech in Ottawa on Wednesday, Notley urged the federal government to support his government's move to buy raw cars and locomotives, but said the province would act alone if necessary and almost reach such an agreement. He said, the oil railroad would eventually add 120,000 barrels per day of exports, above 350,000 barrels per day from the current capacity of crude oil per rail.

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"There is a value to this investment and not only from the fastest perspective but also as a hedge against further pipe delays," Premier said. "The federal government must be at this table. There is no reason for their absence. "

Ms Notley said depressed oil prices were happening "because Canada deliberately detained Alberta's economy and Canada's economic hostage" by failing to get a new pipeline built.

In a letter sent nearly three weeks ago, Notley urged Prime Minister Justin Trudeau to respond with a sense of crisis to the deep decline in Alberta oil prices and provide financial support for his plans to buy rail cars.

Asked about requests for funding on Wednesday, the Prime Minister's Office directed questions to the Department of Natural Resources. A spokesman for Minister of Natural Resources Amarjeet Sohi said federal officials worked with Alberta colleagues to analyze options – including Ms. raw-by-train proposal. Notley – to overcome the crisis. "We are focused on ensuring that every barrel of oil in Alberta gets full value," Vanessa Adams said in an email statement.

As a result of the lack of pipeline space and rising inventories in Alberta, Western Canadian crude oil prices have dropped sharply compared to North America's main benchmark, West Texas Intermediate (WTI), which has dropped dramatically since early October to close Wednesday at US $ 50, 30 per barrel. The Western Canadian Select – which is traded at a discounted price of US $ 41 per barrel for December – sees a narrow spread on Tuesday to US $ 33.50 for January delivery, according to NetEnergy, a Calgary-based trading company. Edmonton light crude – which is usually sold for a small price to WTI – is sold Wednesday at a discount of US $ 25.25, NetEnergy reported.

United States Conservative Party leader Jason Kenney got hot on Wednesday in the New Democratic Premier Party by asking his government to force cuts of 200,000 barrels per day to 13 large producers while freeing small companies from the policy. The cut will come above the estimated 200,000 barrels per day in the reduction announced by several oil sands companies, including the giant Cenovus Energy.

"I am a free market conservative," Kenney told reporters in Edmonton. "I believe government intervention in the market should be avoided, which is why I initially opposed the idea of ​​mandatory restrictions when it was first launched a few weeks ago. But after extensive consultation, I now believe that the action is necessary. "

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The Alberta government is still evaluating whether to impose production cuts or provide incentives to achieve voluntary reductions. This will announce the plan "in the next week or so," said Ms Notley. He stressed that the options included several forms of incentives related to royalty payments, but added that there were many other approaches considered.

"The industry itself is very complex; the players are arranged differently and the implications are different for each of them, as is the royalty regime in which they operate, "he said." So we have to look at the whole picture. "

Premier believes that additional rail capacity will increase Western Canadian oil prices by $ 4 per barrel and pay for itself over the next few years before the proposed expansion of the Trans Mountain pipeline is completed. And it will function as insurance against further pipeline delays, he said.

In the House of Commons, the Conservative Opposition Party launched an emergency debate on Wednesday night, arguing that the Liberal government had failed to respond to the crisis that spread from Alberta and affected the economy of the entire country.


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