Fort McMurray and the Canadian Oil Market: A Quick Look

By The A-Team | Aug 27, 2019 | Fort McMurray - Market Analysis

The oil industry is one of the bloodlines in overall economy of Canada but it had been a roller coaster ride for this sector in the previous years to the present. From legislation to oil companies changing their business strategies every now and then, the fluidity of the industry is inevitable. Programs such as the curtailment policy in the oil sector are adding to the seemingly unending debates and challenges.

According to a news report from, the program will be extended until December 2020, further giving the Alberta government authority in the imposition of production caps, affecting all oil companies in the region:

“I am the very last person who wants to see curtailment continue,” Energy Minister Sonya Savage said Tuesday. But while extending curtailment is far from ideal, under the current context it is necessary.” - Via
The updated policy aims to offer more flexible options and better results for the industry based on the statement by the Minister of Energy. This would include offering more advanced notice to oil producers regarding any changes to production limits. It would also double the curtailment base limit as reported by
In addition, the extension would increase the base deduction from 10,000 BPD to 20,000 BPD and adjust the curtailment formula accordingly – resulting in an increase of about 25,000 BPD to the allowed production limit for October.

It will also reduce red tape for small producers.

Savage adds an extension is the last thing the provincial government wanted – but that it’s essential to improving market access. - Via

The province went for the curtailment extension mainly because of the Line 3 Replacement project of Enbridge, which would reach the US Midwest and could add up to 370,000-barre capacity on a daily export basis. However, due to the production limits, more than 150,000 barrels are kept from the export market.

Canada is trying to increase its export presence in the international oil market, pushing oilsands firms to consider measures such as diluent recovery units for increased volumes of crude by rail. This report from states:

Ongoing pipeline project delays and growth in crude-by-rail capacity from Western Canada are leading some oilsands producers to consider spending billions of dollars to build diluent recovery units.

Oilsands bitumen is a thick, sticky oil which must be diluted with about half as much light petroleum to flow in a pipeline, but diluent isn’t needed for rail transport because the product can be heated for loading and unloading.

In a recent interview, Cenovus Energy Inc. CEO Alex Pourbaix said his company is actively investigating building a unit at its terminal near Edmonton which would cost between $800 million and $1 billion. - Via

Analysts are saying the proposed diluent recovery units to be based in Alberta could improve the overall efficiency and profitability of crude by rail in the country as well as in the southern US. Thus, such developments in the oil sector show its active participation in the Canadian economy now more than ever.

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