Imperial Oil CEO Rich Kruger warned weeks ago that if the province restricted oil production in Alberta, the company would re-evaluate the future of its new $2.6-billion oilsands project.

It wasn’t an idle threat.

The country’s largest integrated oil producer declared Friday it will slow the pace of work this year on the Aspen thermal oilsands development northeast of Fort McMurray, likely delaying for at least 12 months its original 2022 startup plan.

Imperial cited “market uncertainty stemming from Alberta government intervention,” along with other competitiveness issues, for the decision.

It’s no secret the Calgary-based company fiercely opposed the province mandating oil production cuts this year.

Ramping down a major growth project isn’t simply idle talk or lofty rhetoric.

It’s a big-budget decision.

One quick way to get government’s attention is to yank spending off the table.

It also lets those at the Alberta legislature know it’s serious, and wants curtailment wound down as quickly as possible.

“We cannot invest billions of dollars on behalf of our shareholders given the uncertainty in the current business environment,” Kruger said in a statement.

But here’s the rub.

The recent delay of the Enbridge Line 3 project until the second half of 2020 makes it more difficult for the government to balance production with pipeline capacity without some form of mandated cuts.

It could throw a wrench into the province’s plan to sharply lower curtailment volumes after the first quarter of this year and wind the program down by the end of 2019.

On Friday afternoon, news emerged that TransCanada Corp. lost a U.S. court ruling on the Keystone XL pipeline, which could lead to another delay in beginning project construction this year.

The hard truth is there’s no pipeline relief in sight.

Here’s another consideration.

Like it or hate it, curtailment is working.

The decision to limit production, beginning Jan. 1, lowered the differential between benchmark U.S. crude prices and Western Canadian Select heavy oil from an average of US$44 a barrel in December to $17 the following month.

On Friday, the discount stood at just $10 a barrel, according to Net Energy.

If the government did not take action, a sea of red ink would have washed across parts of the oilpatch in 2019, with massive job losses in tow.

A review of fourth-quarter results from a few producers, before curtailment began, shows the brutal impact of steep oil-price discounts.

Pengrowth Energy Corp. reported a $503-million net loss. Canadian Natural Resources Ltd. posted a $776-million loss. Cenovus Energy Inc. had a $1.36-billion …read more

Source:: Calgaryherald.com

      

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Varcoe: Imperial blames curtailment as it ramps down Aspen oilsands project

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