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At least one oil company in Saskatchewan agrees with the provincial government’s decision to not make cuts to oil production.
Premier Scott Moe announced on Monday that he would not be following the Alberta Premier’s lead in legislating cuts to production. Rachel Notley hopes slowing down supply will help raise the lagging Western Canadian Select Price.
Grant Fagerheim is the president and CEO of Whitecap Resources Inc. which does work in Alberta but has 60 per cent of its production in Saskatchewan.
He agrees with Alberta’s decision to make cuts to production, but also Saskatchewan’s decision not to.
“The problem that is made, is a ‘made-in-Alberta’ problem with the oil sands growth that we’ve seen this year. So having Saskatchewan having to participate, be penalized, because of the growth in the oil sands in Alberta I think would be improper and incorrect.”
Fagerheim said there are key differences between oil in the two provinces that means a similar initiative in Saskatchewan wouldn’t do much.
“If we used the similar type of ratios I think you’d end up with very little production being suspended or curtailed in Saskatchewan, and it would just be harmful to more of the municipalities and communities in the province.”
This is similar to what Moe said on Monday, pointing to consultations with the oil industry. Whitecap Resources Inc. wasn’t part of these consultations, but Fagerheim said he admires how much the provincial government does consult with the industry.
Fagerheim said his company has been hit hard by the difference between the West Texas Intermediate price and Western Canadian Select. He said they usually sell at a $3-$5 discount, but now the difference is about $26.
The change in Alberta would affect his company by about 600 barrels of oil a day, said Fagerheim.
Next year is going to be challenging, Fagerheim said, but the company isn’t looking at layoffs right now. He said even if they reduce capital expenses, they still have lots of projects for people to work on.
Fagerheim put a lot of the onus on the federal government to help right this problem.
“This should be the responsibility of our federal government to get pipelines built in our country so we can get our products to market.”
A lack of access to markets is one of the reasons the Western Canadian Select price has dropped.
Other companies mixed on reaction to cuts
Husky Energy does a lot of business in Saskatchewan’s oil industry as well as Alberta’s.
In an emailed statement, the company said that while it will comply with the production cuts in Alberta, it doesn’t think it’s the right call.
“We believe the market is working and view government-ordered curtailment or other interventions as possibly having serious negative investment, economic and trade consequences.”
Not all companies are affected by the cuts. In an email, Crescent Point Energy said, right now, it doesn’t produce more than 10,000 barrels of oil a day, which is where the production cuts in Alberta are set.
It also hasn’t been much affected by the price differential. It said 90 per cent of its oil production is either in the U.S., or is downstream of the recent apportionment points which are impacting prices, so it’s average selling price hasn’t been as impacted as other companies.