Canada oil cuts set to deepen as Alberta province eyes global deal
By Jeff Lewis and Rod Nickel
TORONTO/WINNIPEG, Manitoba (Reuters) - Steep Canadian oil production cuts are expected due to a crash in prices, three of the country's major energy companies said on Tuesday, as the Alberta provincial government prepared to join a meeting this week with OPEC on reducing supply.
Some 20-25% of Western Canada's production could be shut in during the second quarter, said Enbridge Inc Chief Executive Al Monaco at a virtual investor conference held by Bank of Nova Scotia and Canadian Association of Petroleum Producers. Western Canada produced an estimated 4.5 million barrels per day (bpd) in March.
Enbridge's prediction is in line with a forecast of 1.1 million to 1.7 million bpd from Royal Bank of Canada. About 135,000 bpd has already been cut in just the oil sands, according to TD Securities.
Saudi Arabia, Russia and allied oil producers will only agree to deep cuts to their output if the United States and others join in with curbs to prop up prices that have been hammered by the pandemic, an OPEC source told Reuters. [nL8N2BV3C5]
Oil sands producer Cenovus Energy has reduced output at its Christina Lake oil sands operation by 40,000 to 45,000 bpd and can cut more if needed, Chief Executive Alex Pourbaix said at the investor conference. The company could suspend more than 100,000 bpd across its operations without damaging bitumen reservoirs, he said.
"We think we could go beyond that if we need to and we could keep that up for many months,” he said. Pourbaix reiterated support for further Alberta government curtailments to avoid a storage crunch and said global coordination on reductions may be required to ensure the industry's viability.
But Imperial Oil, majority-owned by Exxon Mobil Corp, opposes any government-ordered curtailments, said Daniel Lyons, Senior Vice-President Finance and Administration.
"Anything is on the table" for the scale of Imperial's future curtailments, and they would occur at its Kearl, Alberta mine, which can modulate production more easily than its Cold Lake in situ site, he said.
Oil sands expansion projects have stalled in recent years due to congested pipelines, a problem now being solved with three projects proceeding, including Enbridge's Line 3, Monaco said.
"Once demand normalizes ... we're going to see a good resurgence in volume."
The Alberta government is in regular contact with OPEC Secretary General Mohammad Barkindo about solutions to bring the oil market back into balance, Alberta Energy Minister Sonya Savage said.
"There is a worldwide recognition that this is not sustainable," she said.
(This story corrects to show that cuts in oil sands production in third paragraph.)
(Reporting by Jeff Lewis in Toronto and Rod Nickel in Winnipeg, Manitoba; Editing by Bernadette Baum and Nick Zieminski)
