Two of Canada’s biggest integrated oil producers on Friday urged the incoming Alberta government to end mandatory production cuts, saying they have hurt the economy and deterred investment in the country’s main crude-producing province.
Alberta imposed the curtailments in January in an attempt to reduce hefty price discounts on Canadian crude that reflected production that far exceeded pipeline space.
Imperial Oil Ltd and Husky Energy previously benefited from refining cheaper oil, and opposed the cuts.
“Alberta needs to take concrete measures to rebuild investor confidence,” Husky Chief Executive Rob Peabody said on a conference call. “We have a new government and we urge them to return to competitive free market principles by ending quotas and allowing the market to manage itself in a more natural and efficient manner.”
Alberta’s new Premier Jason Kenney, leader of the United Conservative Party government, will be sworn in next week.
Curtailments have resulted in producers shutting in output that would otherwise be profitable, and caused job losses for companies that provide services such as drilling, Peabody said. He added that it is unclear whether the curtailments have meaningfully reduced a glut of oil in storage.
Imperial CEO Rich Kruger said the only positive from curtailments was higher crude prices. The intervention had also removed the incentive for crude-by-rail shipments, which in turn meant oil inventories remained high, eroded investor confidence and deterred traders from making longer-term bets on Canadian crude prices, he said.
“One out of five (measures) is up, the other four are down,” Kruger told shareholders at Imperial’s annual general meeting. “I am a big sports fan, particularly baseball. If I batted one out of five, I’d be on a long bus ride to the minor leagues.”
Kruger estimated curtailments had cost Imperial $250 million relative to the fourth quarter of 2018. The company’s income nearly halved in the first quarter due to extreme cold weather, production cuts and weak refining margins.
Husky beat analysts’ estimates for quarterly profit as it benefited from improved prices even as production fell.
The CEO of integrated producer Suncor Energy also advised the incoming government to find a managed way to exit curtailments in an interview with Reuters on Thursday.
Rival Cenovus Energy offered a different view on Wednesday, when CEO Alex Pourbaix praised the cuts for improving Canadian prices, allowing that company to return to quarterly profit.
Imperial shares fell 1.6 per cent, while Husky stock rose 0.2 per cent in Toronto.