File photo by THE CANADIAN PRESS                                Imperial CEO Rich Kruger said price differentials between Canadian and U.S. benchmarks have gotten so narrow it doesn’t make sense to export crude by rail, which is generally more expensive than by pipeline, to gain higher prices at the delivery point.

File photo by THE CANADIAN PRESS Imperial CEO Rich Kruger said price differentials between Canadian and U.S. benchmarks have gotten so narrow it doesn’t make sense to export crude by rail, which is generally more expensive than by pipeline, to gain higher prices at the delivery point.

Alberta oil curtailment pluses outweighed by minuses, say Imperial, Husky CEOs

CALGARY — A bitter squabble between oilsands producers over the wisdom and outcomes of Alberta’s crude curtailment program continued Friday with CEOs of both Imperial Oil Ltd. and Husky Energy Inc. insisting the move has harmed the industry.

The reductions that started Jan. 1 have met their goal of reducing discounts in western Canadian oil prices, the two agreed, but both complained it has failed to draw down oil in storage and has resulted in fewer barrels being shipped out by rail.

Imperial CEO Rich Kruger said price differentials between Canadian and U.S. benchmarks have gotten so narrow it doesn’t make sense to export crude by rail, which is generally more expensive than by pipeline, to gain higher prices at the delivery point.

He said that’s why the company decided to delay construction of its $2.6-billion Aspen thermal oilsands project in March, after approving it in November, and why it halted almost all crude-by-rail shipments from its co-owned Edmonton rail terminal in February.

“(Storage) tanks were full at the end of the year in the province and the goal was to reduce that inventory so that we had a little more cushion,” said Kruger at the company’s annual meeting.

“Inventories initially declined. With decreased rail, tanks are full again. We’re right back now where we started four or five months ago before curtailment.”

The gains in the price of heavy oil cost Imperial $250 million in higher feedstock prices at its refineries in the first quarter, he said, compared with the fourth quarter of last year when the difference between Western Canadian Select bitumen-blend oil and New York-traded West Texas Intermediate peaked at as much as US$52 per barrel.

Higher local crude prices have come at the cost of oilfield service industry layoffs, poorer rail shipping economics and “unprecedented uncertainty” among investors, said Husky CEO Rob Peabody on a conference call to discuss financial results.

“Industry is shutting in barrels that would otherwise have been economic. This has provoked job losses and resulted in economic hardship for the service sector, which will ultimately reduce the tax base,” Peabody said.

“Whether higher royalties on a diminished production base offset the broader social costs is an open question.”

He and Kruger both called on the newly elected United Conservative Party, set to be sworn in next week, to kill off the curtailment program.

In an email, a spokesman for the UCP pointed out that premier-elect Jason Kenney has previously said he supports the move by the NDP government as an “unfortunate, but a necessary thing to do” and favours gradually reducing the cuts over the coming year.

On Wednesday, Cenovus Energy Inc. CEO Alex Pourbaix told analysts the curtailment program is working well as an oil price support and delivering billions of dollars in additional royalties to the provincial treasury. He said it should be continued until it’s no longer needed.

oil curtailment

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

The first Pfizer-BioNTech COVID-19 vaccine dose in Canada is prepared at The Michener Institute in Toronto on Monday, Dec. 14, 2020. (THE CANADIAN PRESS/Frank Gunn)
Not all long-term care workers have received their vaccines including a Red Deer facility

There continues to be confusion in long-term care and supportive living facilities… Continue reading

Cattle graze winter pasture in the foothills of the Canadian Rockies near Longview, Alta. on Jan. 8, 2004. Concern over the provincial government’s decision to drop a coal policy that has protected the eastern slopes of the Rockies for decades is growing among area communities. At least six cities, towns and municipal districts in southwest Alberta have now expressed concern about the decision and the fact it was made with no consultation. The latest is Longview, where mayor Kathie Wight is drafting a letter to the government opposing the move. THE CANADIAN PRESS/Jeff McIntosh
More southern Alberta communities voice concern over province’s plans to expand coal

Concern over the Alberta government’s decision to drop a coal policy that… Continue reading

Some residents say there is no longer an effective Nordegg fire department to respond to emergencies in the West Country. (Contributed photo).
Some Nordegg residents worry about lack of emergency response in the West Country

The possibility of wildfires or accidents is ‘scary’ says former fire leader

(Advocate file photo).
Six idling vehicles stolen in last 48 hours: Red Deer RCMP

Red Deer RCMP said Wednesday six idling vehicles in the city were… Continue reading

An oil and gas pumpjack is shown near Cremona, Alta., Thursday, Oct. 1, 2020. Canada's oil and gas producers are expected to maintain spending discipline in 2021 as optimism from recently stronger oil prices is offset by fears of continuing weak consumer energy demand due to new strains of the COVID-19 pandemic.THE CANADIAN PRESS/Jeff McIntosh
Cautious optimism rules oilpatch as fourth-quarter reporting season dawns

Cautious optimism rules oilpatch as fourth-quarter reporting season dawns

A man works in the broadcast centre at the TMX Group Ltd. in Toronto, on May 9, 2014. THE CANADIAN PRESS/Darren Calabrese
S&P/TSX composite wipes out early gains of 2021 after worst day since October

S&P/TSX composite wipes out early gains of 2021 after worst day since October

In this undated image made from a video taken by the Duke of Sussex and posted on @SaveChildrenUK by the Duke of Sussex and Meghan, Duchess of Sussex, shows the Duchess of Sussex reading the book “Duck! Rabbit!” to their son Archie who celebrates his first birthday on Wednesday May 6, 2020. The Canadian Paediatric Society is reminding families that the process of raising a reader starts from birth. THE CANADIAN PRESS/AP-Duke of Sussex/@SaveChildrenUK via AP MANDATORY CREDIT
Canadian Paediatric Society says raising a reader starts from birth

The Canadian Paediatric Society is reminding families that the process of raising… Continue reading

People wearing face masks as a precaution against the coronavirus walk past a depiction of Sen. Bernie Sanders, I-Vt., in Philadelphia, Monday, Jan. 25, 2021. (AP Photo/Matt Rourke)
Bernie Sanders’ mittens, memes help raise $1.8M for charity

About those wooly mittens that U.S. Sen. Bernie Sanders wore to the… Continue reading

Bags of methamphetamine seized at Coutts, Alta., border crossing is shown in this December 2020 handout photo. The Canada Border Services Agency says it has made Canada’s largest-ever seizure of methamphetamine at an Alberta land border crossing from the United States. The agency says on Christmas Day, it flagged a produce truck at the Coutts border crossing for further inspection. Officers found more than 228 kilograms of meth with an estimated street value of $28.5 million. THE CANADIAN PRESS/HO - Canada Border Services Agency
Alberta border agents made record meth bust after pulling over produce truck

COUTTS, Alta. — The Canada Border Services Agency says officers in southern… Continue reading

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic in Toronto on Thursday, Jan. 7, 2021. Quebec’s director of national health says he’s still not sure when the province will begin administering COVID-19 booster shots — 42 days since officials started injecting people with the Pfizer-BioNTech vaccine. THE CANADIAN PRESS/Nathan Denette
Calculated risk or gamble: Experts differ on merits of Quebec’s vaccine strategy

MONTREAL — Quebec’s director of national health said he’s still not sure… Continue reading

This electron microscope image made available by the U.S. National Institutes of Health in February 2020 shows the novel coronavirus SARS-CoV-2, in yellow, emerging from the surface of cells, blue/pink, cultured in a lab. The Canadian Armed Forces is dealing with a dramatic increase in the number of troops who have been infected with COVID-19 over the past month. THE CANADIAN PRESS/AP-NIAID-RML via AP
Canadian military dealing with surge in new COVID-19 infections since December

OTTAWA — The Canadian Armed Forces is dealing with a dramatic increase… Continue reading

Advocates for the homeless hold a protest against the COVID-19 curfew Monday, January 11, 2021 in Montreal. The Quebec government says it will not challenge a temporary court order granted Tuesday that exempts the homeless from a provincewide curfew imposed to limit the spread of COVID-19. THE CANADIAN PRESS/Ryan Remiorz
Quebec to exempt homeless from curfew after court finds measure endangered safety

MONTREAL — The Quebec government said Wednesday it will not challenge a… Continue reading

Most Read