Alberta Government To Stop Its Oil By Rail Program By Fall

The government of Alberta, Canada is looking to offload its massive oil-by-rail program in what the Alberta Energy Minister Sonya Savage described as “highly confidential” negotiations, according to a Thursday news release.

The news is just the latest in a series of dramatic political developments in Canada’s oil industry that has caused deep rifts between parties as the future of its oil business is reshaped one hard-fought battle at a time.

The NDP government had promised back in February lucrative outflows from getting its hands in the oil by rail business at a price tag of nearly $4 billion. The windfall was expected to be over $2 billion over three years.  Now the Energy Ministry is signing a different tune—the project is now supposed to generate a loss, rather than substantial income. A large loss of $1.5 billion.

Regardless of the merits of this information or the information presented in February, Alberta is now heading for the oil-by-rail exit, enlisting the help of CIBC Capital Markets to divest from this pricey endeavor by selling it off to the private sector. A deal is expected by fall.

“As a government we are accountable to the taxpayer,” Savage said on Thursday.

The oil by rail project taken on the government was supposed to help Alberta move its oil to customers as pipeline capacity is already maxed, interfering with getting its oil to market. In the meantime, Canada has reduced oil production on a non-voluntary basis to help prop up prices as the outflow capacity is simply not enough to keep oil inventories from growing unchecked.

The production cuts were successful in shoring up the discount to WTI, which had reached $45 per barrel at the time of the cuts in late 2018, to about $12 per barrel today. The government also announced today that it will again ease the restrictions come August—to 3.74 million barrels per day, according to the Calgary Herald.

By Julianne Geiger for Oilprice.com

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