Alberta eases oil production limit as it exports more crude

CALGARY (Bloomberg) --Alberta has relaxed the production limits it imposed on oil producers as it exports more barrels via rail and pipeline.

Easing the production limit by 25,000 bpd means that operators can now produce about 175,000 bpd below what they were producing late last year, just before the province imposed the cut to alleviate a glut caused by too much oil and too few pipelines. The bottlenecks caused local heavy oil prices to collapse to as much as $50/bbl below the price of WTI futures in October.

Western Canadian Select crude prices strengthened this year as a result of the cuts and as more oil was shipped out by rail and as Enbridge Inc. announced that it could move more crude through its system.

Canadian Pacific Railway Ltd. expects a 20% increase in crude-by-rail volumes in the third quarter versus the second quarter. Oil volumes loaded onto rail cars totaled 285,000 bpd in May, the highest since January, National Energy Board data show.

Last month, Enbridge said it could add 135,000 bpd of extra capacity to its system by early next year through “system enhancements” even after the company announced a year delay on the start of its expanded Line 3 export pipeline amid regulatory setbacks.

Alberta’s oil producers have been divided over the wisdom of the government’s curtailment program. But several companies including Cenovus Energy and Suncor Energy have proposed that production limits be increased for companies that ship more volumes out by rail. The production limits apply to 29 out of more than 300 oil producers in Alberta.