Alberta ready to buy rail cars to boost crude shipments

Alberta plans to purchase rail cars early in the New Year to transport an additional 120,000 barrels of oil a day out of the province as it plans to cut production to reduce glut of the supply that pushed oil prices into the Canadian West to negotiate. basement levels.

Premier Rachel Notley is under pressure to find alternatives to shipping Alberta oil due to lack of pipeline capacity. In addition to increasing the volume of cars, she plans to provide incentives, including breaks on future royalty payments, to companies that agree to reduce their production now. It is even considering mandatory production cuts across the sector. Such measures would reduce supply to allow oil prices in the market to rebound.

In a speech to Ottawa on Wednesday, Notley urged the federal government to support her government's decision to purchase crude-oil cars and locomotives, while noting that the province would act alone if necessary. about to conclude such an agreement. She added that oil trains would increase by 120,000 barrels per day of exports, in addition to the current 350,000 barrels of rail crude capacity.

"This investment is of interest not only from the most immediate point of view, but also to guard against further delays in the pipeline," said the Prime Minister. "The federal government should be at the table about this. There is no excuse for their absence. "

Notley said crude prices were depressed "because Canada deliberately holds the Government of Alberta and Canada's economy hostage" by not building new pipelines.

In a letter sent nearly three weeks ago, Notley urged Prime Minister Justin Trudeau to react with a sense of crisis to the deep drop in the price of oil in Alberta and to provide financial support for his project. purchase of wagons.

Asked on Wednesday for the funding request, the Prime Minister's Office sent questions to the Department of Natural Resources. A spokeswoman for Natural Resources Minister Amarjeet Sohi said federal officials were working with their Alberta counterparts to badyze the options – including Notley's proposal on crude oil by rail – to deal with the problem. crisis. "Our goal is to ensure that every barrel of Alberta oil gets its value," Vanessa Adams said in an email release.

Due to lack of space on the pipeline and rising inventories in Alberta, crude oil prices in Western Canada have fallen sharply relative to the main North American benchmark, West Texas. Intermediate (WTI), which has fallen steeply since early October until nearly Wednesday at 50.30 USD a barrel. The Western Canadian Select, which traded at $ 41 a barrel in December, saw the gap shrink Tuesday to $ 33.50 for the January delivery, according to NetEnergy, a trading company based in Calgary. Edmonton's light crude – which is generally priced slightly higher than WTI – was sold Wednesday with a rebate of $ 25.25, NetEnergy reported.

The leader of the United Conservative Party of Alberta, Jason Kenney, on Wednesday urged the Premier of the New Democratic Party to ask his government to impose a production reduction of 200,000 barrels per day to 13 major producers while exempting the small business policy. These reductions would add to the estimated 200,000 barrels per day reductions already announced by several oil sands companies, including the giant Cenovus Energy.

"I'm a free market Conservative," Kenney told reporters in Edmonton. "I think the government should generally avoid any government intervention in the markets. That is why I was first opposed to the idea of ​​a mandatory discount, when it was first introduced a few weeks ago. But after long consultations, I think now that measures are imposing. "

The Alberta government is still trying to determine whether to impose a reduction in production or provide incentives for voluntary abatement. She will announce her plan "in the coming week," Notley said. She confirmed that the options include some form of royalty payment incentive, but added that many other approaches were being considered.

"The industry itself is very complex. the players are organized differently and the implications are different for each of them, as is the royalty regime under which they operate, "she said. We must therefore examine the situation as a whole. "

The Premier argued that the additional rail capacity would increase western Canadian crude oil prices by US $ 4 per barrel and would pay for itself over the next few years before the end of the proposed Trans-pipeline extension. Mountain. And that would serve as a guarantee against further delays in the pipeline, she said.

In the House of Commons, the Conservative opposition on Wednesday night called for an emergency debate, saying the Liberal government failed to respond to the crisis that was spreading from Alberta to the economy of everything. the country.