Alberta Sees Progress on Crude-by-Rail Talks to Ease Oil Curtailments

CALGARY, Alberta (Reuters) - The premier of Canada's main oil-producing province Alberta said on Wednesday he is hopeful of more progress this month on talks between his government and producers about easing oil curtailments, as long as extra output is shipped by rail.

Alberta introduced mandatory production curtailments, effective Jan. 1 2019, to ease congestion on export pipelines and support crude prices. Last month Premier Jason Kenney's government extended those curtailments into 2020 because of slow progress in building new pipelines.

Major producers including Suncor Energy and Canadian Natural Resources Ltd have suggested the government allow them to boost output above curtailment limits, on the condition incremental production is exported by rail.

"We are working on that and hope to have some more progress by later this month," Kenney told reporters on a conference call from New York, where he has been promoting Alberta's energy industry to investors.

The government is also trying to offload onto the private sector nearly C$4 billion ($3 billion) of crude-by-rail contracts that were signed by the previous government, amounting to 120,000 barrels-per-day of crude.

Kenney said the two issues of increasing production and the rail contracts were tied.

"If we are going to see a way forward for additional shipments of Alberta crude-by-rail we also need to see producers assume those contracts at a fair price," he said, adding his government had received 16 proposals from companies.

Canadian crude-by-rail loadings averaged 214,000 bpd in August, according to energy information provider Genscape.

Kenney said there seemed to be a consensus in industry that crude-by-rail shipments should be able to reach 550,000 bpd, a number that would help relieve pipeline congestion and could spur more investment in Alberta's energy industry.

Suncor Chief Executive Mark Little, speaking to reporters on the sidelines of a conference in Calgary on Tuesday, said a number of significant companies in the Canadian oil patch were working with the government to find a solution.

"We have an opportunity to take idle rail capacity and move the shut-in production on the idle rail capacity. We are encouraged by the progress," Little said. "This is now a big priority and we are working collectively together to move this forward."

($1 = 1.3273 Canadian dollars)

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