Suncor Energy weighing impact of Alberta’s mandatory oil production cuts for next year
Suncor Energy (TSX:SU), Canada’s largest oil and gas producer by market cap, said Monday it was evaluating the impact of the Alberta government’s decision to force oil production cuts next year to deal with a pipeline bottleneck that has led to stock oversupply and driven down the country’s crude prices.
The Calgary-based company noted the exact impact of the mandatory cuts, to be applied by producer rather than per project, will be specified when it issues its 2019 capital and production guidance.
The oil-rich Canadian province announced a plan Sunday to force producers reduce output by 8.7%, or 325,000 barrels per day (bpd), effective Jan. 1, 2019, until the excess crude in storage is drawn down. The cuts will then drop to 95,000 bpd until Dec. 31, 2019.
Cenovus Energy Inc. (TSX:CVE) suggested production cuts last month, but the idea of forced reductions has been opposed by several large players in the oil patch. Instead, oil sands producers, including Canadian Natural Resource Ltd., Devon Energy Corp., Athabasca Oil Corp. and Cenovus Energy, have voluntarily tried to ease the glut by announcing curtailments that may total 140,000 barrels a day or more.
Suncor adhered to its rivals move, saying it believed the market was the most effective means to balance supply and demand and normalize differentials.