Canada’s oil sector is divided over whether to force a temporary cut to production, with some major producers pushing the controversial idea in a bid to ease a supply glut and halt a steep plunge in prices, according to seven people familiar with the matter.
Executives from Canadian Natural Resources Ltd and Nexen Energy ULC are among those who made the pitch to Alberta’s premier last month, the people said, speaking on condition of anonymity as the meeting was private. Cenovus Energy Inc is also publicly advocating for a forced cut.
The producers called on Rachel Notley to invoke a provincial government power to force “curtailment,” the people said, at a time when Canadian heavy crude is selling for a near-record discount from US benchmark prices, costing Alberta billions. Some called for a temporary 10 percent cut, or about 380,000 barrels per day, until the market stabilizes, the people said.
But the push is opposed by Suncor Energy Inc; ExxonMobil Corp’s Canadian unit, Imperial Oil Ltd; and Husky Energy Inc, the people say. Each has integrated operations, from production to refineries, that cushion the blow and therefore want to let the market sort out the oversupply issue.
Notley’s government has publicly lowered expectations for intervention. She emerged from the meeting calling for the purchase of more oil-hauling rail cars, but didn’t advocate curtailment. The unusual standoff reflects the dire straits most producers are in.
“At the price that Albertans are getting for their oil, no one is making any money whatsoever in the upstream industry. At the same time, number of producers who are integrated with refineries are making windfall profits,” Cenovus Chief Executive Officer Alex Pourbaix told BNN Bloomberg television, declining to name names.
Canadian producers are not only being hit by the global plunge in oil prices, but face severe transport bottlenecks that have caused the northern nation’s customary discount to balloon to near record highs. A barrel of Canadian heavy crude was worth $15.75.