Steep Canadian oil production cuts are expected due to a crash in oil prices, two of the country’s major energy companies said on Tuesday.
Some 20-25% of Western Canada’s crude oil production could be shut in during the current second quarter, said Enbridge Inc Chief Executive Al Monaco. Western Canada produced an estimated 4.5 million barrels per day in March, according to the Canada Energy Regulator.
That estimate is in line with a forecast of 1.1 million to 1.7 million barrels from Royal Bank of Canada last week. About 135,000 barrels per day has been cut so far, according to TD Securities.
Saudi Arabia, Russia and allied oil producers will only agree to deep cuts to their crude output at this week’s talks if the United States and several others join in with curbs to help prop up prices that have been hammered by the coronavirus pandemic, an OPEC source told Reuters on Tuesday.
Oil sands producer Cenovus Energy Inc has reduced output at its Christina Lake oil sands operation by 40,000 to 45,000 barrels per day and has capacity to cut more if needed, Chief Executive Alex Pourbaix said on Tuesday.
The company could suspend more than 100,000 barrels per day of production 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 told a virtual Bank of Nova Scotia conference.
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 ongoing viability.
“It’s very hard for anyone to argue that they’re making windfall profits” at current prices, he said.
Even so, a queue of oil sand expansion projects has been 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, I think the (Western Canada) basin is going to be in good shape. We’re going to see a good resurgence in volume.”
The Canadian province of Alberta, home to the world’s third-largest oil reserves, 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.
“I think there is a worldwide recognition that this is not sustainable,” she said.