Page 5 - NorthAmOil Week 15

NorthAmOil COMMENTARY NorthAmOil
and IHS Markit warned that it could fall further still.
Meanwhile, oil storage capacity in the coun- try – like elsewhere in the world – is rapidly filling up, putting more pressure on the indus- try and paving the way for more production shut-ins.
“Western Canada’s chronic lack of storage capacity was guaranteed to emerge as a key con- straint on upstream volumes in a low-demand environment,” a Rystad senior analyst, Thomas Liles, commented. In a statement ahead of the OPEC+ meeting, he added that Canadian pro- duction was likely to remain “decoupled” from any global supply cuts that were agreed.
Comments from certain producers back up the trends being highlighted by consultancies. At a virtual investor conference held last week by the Bank of Nova Scotia and the Canadian Association of Petroleum Producers (CAPP), Cenovus Energy’s CEO, Alex Pourbaix, said his company had reduced output at its Christina Lake oil sands project by 40,000-45,000 bpd. The producer can cut more barrels if needed, he added.
Pourbaix is among those who support further curtailments by the Alberta government, which has already had restrictions on provincial pro- duction in place since early 2019 in order to prop up regional crude prices. The province had been cautiously easing the restrictions since the sec- ond half of last year, but recent developments are likely to pause these moves, if not reverse them outright.
However, Imperial Oil – another of Cana- da’s leading oil sands players, which is major- ity-owned by ExxonMobil – opposes any additional mandatory curtailments.
Also speaking at the same virtual investor
conference as Pourbaix, Imperial’s senior vice-president of finance and administration, Daniel Lyons, nonetheless said that anything was “on the table” in terms of the size of com- pany curtailments. If shut-ins are necessary, they would occur at the Kearl mine, which can modulate production more easily than Imperi- al’s Cold Lake in situ site, Lyons added.
This is in line with Rystad’s expectations that large thermal projects need to maintain thermal reservoir integrity, while mining projects can adjust short-term output with greater technical ease, making shut-ins at mining projects more likely.
What next?
As Canadian producers consider where they may be forced to cut output, they are also await- ing further details of what federal financial aid will be made available to them.
Calls have intensified for Canadian Prime Minister Justin Trudeau to provide a bail-out to the industry after both he and Minister of Finance Bill Morneau said recently that a finan- cial aid package was on its way.
“We will and we are looking at more specific sector-related relief and supports for those sec- tors that are hardest hit – whether it’s the tour- ism sector, the airline sector or the oil and gas industry or others – we will have more to say on that shortly,” Trudeau said on April 14 during his daily news conference on the coronavirus (COVID-19) pandemic.
Meanwhile, the price of Western Canadian Select (WCS) heavy crude has fallen below $5 per barrel, adding urgency to oil industry pleas for financial aid. Any cautious optimism expressed by Canadian oil producers this year will have evaporated.™
Calls have intensified for Canadian Prime Minister Justin Trudeau to provide a bail-out to the industry.
Cenovus Energy’s CEO, Alex Pourbaix, is among those that has voiced support for further output curtailments by the Alberta government.
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