Part 1: Is Curtailment the Right Solution to the Problem?
 
Earlier this month, the Alberta Government began an oil curtailment policy that could continue for the rest of 2019. The curtailment is a response to low oil prices and excessive supplies of oil in storage. The policy does not restrict export volumes or mandate any price floors; rather, it limits the amount of raw crude oil and bitumen that can be produced in Alberta, including from the oil sands by 8.7 percent (325,000 barrels/day). That means that Alberta has a production ceiling of about 3.411 million barrels of petroleum per day (“bpd”). No more and not likely any less. Alberta has promised to lift the curtailment by 2020, and will ease the production cap as oil storage levels make their way back to normal levels.
 
The stated reasons for the policy are low prices and excessive amounts of processed Alberta oil in storage – an estimated inventory of 35 million barrels. It is normal to have extra inventory on hand, even for the leanest of businesses, but the current amount of oil in storage is about double historical levels. Most Alberta oil is expensive to extract and refine compared to other oils around the world. Thus, with narrow margins, Alberta oil producers are particularly sensitive to substantial levels of storage and low prices.

 

Curtailing Alberta Oil: The... by on Scribd