Alberta still needs oil production cuts: Cenovus CEO
Alberta still needs to curtail oil production or risk widening the differential between Canadian heavy crude and the U.S. benchmark blend back to record levels, according to the chief executive officer of Cenovus Energy Inc. (CVE.TO)
“I think that what’s really important for people to remember is that if we were to step away from curtailment today, we’d be right back in these US$40 or US$50 differentials that we were experiencing in [the fourth quarter],” Cenovus CEO Alex Pourbaix told BNN Bloomberg in a Thursday interview.
“The solution to curtailment is getting either incremental pipeline or what I would describe as structural rail: Rail moving oil on a sustained basis,” he added. “We just need to get that, what I would call, sort of committed egress, and once we have that, I think that provides the condition under which government can start to ramp out of the curtailment program.”
Cenovus was one of the loudest advocates for the initiation of the curtailment program under previous Alberta premier Rachel Notley, saying that the move was necessary to “protect the interest of Albertans” amid a Canadian discount of about US$40 per barrel between Western Canadian crude and West Texas Intermediate prices.
Pourbaix said he and other Albertan producers would support an increase in allotments if individual producers can prove that the product is being moved responsibly. He added that such a solution could be the first step away from curtailment.
“The rationale for it is, ultimately, curtailment is a temporary solution,” Pourbaix said. “I think all of us in the industry would agree that, ultimately, it’s best to get off it. But, to get off it, we need to see rail ramp-up and ultimately, pipelines: New incremental pipeline capacity.”
Pourbaix added that he was encouraged by the National Energy Board’s restoration of many of its decisions to approve the Trans Mountain pipeline expansion earlier this month, but that Canadian producers still need more options to get its product to market.
“The single biggest issue on investors’ minds right now, with respect to Canadian energy companies is market access and their perception of market access and government support for the industry,” he said, calling the NEB decision a “real positive.”
“I think [the NEB decision] is a fantastic thing, but we gotta keep working on all of these other pipelines and get them going.”