Production curtailment in Alberta has achieved the provincial government’s goals, according to Cenovus Energy Inc., Calgary.
Responding to the suppression of crude prices by pipeline congestion in Alberta, the outgoing government of Premier Rachel Notley imposed production cuts totaling 325,000 b/d in January from a base rate of 3.885 million b/d. It has eased the curtailment rate in subsequent months (OGJ Online, Jan. 31, 2019).
In its financial report for the year’s first quarter, Cenovus credited the curtailment with a narrowing of the Western Canadian Select (WCS) discount to West Texas Intermediate crude to an average of $12.37/bbl in the first quarter from record highs in the fourth quarter of 2018.
The oil sands producer said the first-quarter WCS average price of $42.53/bbl was more than double the prior quarter’s level. Cenovus paid $191 million in royalties to the province in the first quarter after accruing a royalty credit of $29 million in the preceding period.
“It should now be crystal clear that the government’s temporary curtailment program is doing what it was intended to do and has had an immediate, positive impact not only for our industry but for all Albertans in the form of improved royalty revenue,” said Alex Pourbaix, Cenovus president and chief executive officer.
Cenovus’s first-quarter oil sands production of 342,980 b/d was 5% below that of first-quarter 2018.
The company said it continues to inject steam at normal rates where it has cut output. The practice raises its cost per barrel of oil produced and steam-oil ratios but allows it “to continue mobilizing and storing production-ready barrels in its reservoirs for sale at a later date when curtailment is eased.”
Notley’s New Democratic Party government was defeated in provincial elections Apr. 6 by the United Conservative Party led by incoming Premier Jason Kenney.