Market Snapshot: Alberta’s production limits impact large oil producers the most

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Release Date: 2019-10-30

The Government of Alberta capped Alberta crude oil production at 3.56 million barrels per day (MMb/d) on 1 January 2019. This was in response to Alberta crude oil production available for export exceeding available export capacity in late 2018, causing western Canadian crude oil to sell at a large discount compared to U.S. oil prices. This issue is discussed in greater detail in the National Energy Board’s (NEB’s) advice to the Minister of Natural ResourcesFootnote 1published in the spring 2019.

The temporary production limit has been gradually increasing since coming into effect, reaching 3.79 MMb/d in October 2019. Production limits are set at 3.80 MMb/d for November 2019 and 3.81 MMb/d for December 2019.

Figure 1. Alberta Estimated Production of Canadian Crude Oil

Source and Description

Source: CER

Description: This graph shows the production of crude oil in Alberta. From December 2018 to June 2019, production of non-upgraded bitumen decreased by approximately 5% from 1.92 MMb/d to 1.83 MMb/d. Production of synthetic crude oil decreased by approximately 2%, from 1.17 MMb/d to 1.15MMb/d. Production of conventional light decreased by approximately 6%, from 392 thousand barrels per day (Mb/d) to 368 Mb/d. Production of conventional heavy increased by approximately 2%, from about 108 Mb/d to 110 Mb/d.

Once production limits were imposed, production of non-upgraded bitumen fell by 18% from December 2018 to January 2019. Shortly thereafter, non-upgraded bitumen production began to increase steadily, increasing by 13% from January to June 2019.

Production of conventional heavy and light oil remained mostly unchanged in response to the production limit. For the most part, conventional production was not impacted because the first 10 000 b/d of production is exempt for each producer, and most small producers focus on conventional production. As of 1 October 2019, this base limit was increased from 10 000 b/d to 20 000 b/d. Production of synthetic crude oil also remained relatively constant. Where possible, large producers with upgrading capability have cut non-upgraded bitumen production to maintain production of light and synthetic crude oil, which tend to have relatively higher value.

Updates to the initial curtailment policy, including increasing the base limit on October 1, reduces the number of affected producers in the province from 29 to 16 of more than 300 producersFootnote 2.

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