Suncor Confronts ‘Unintended Consequences’ of Alberta Oil Cuts

(Bloomberg) -- Suncor Energy Inc. is working with Alberta’s government to help mitigate the “unintended consequences” of mandated oil production cuts, a policy the company opposed from the start and now says is hitting it disproportionately hard.

Canada’s largest energy producer by market value said its initial required output curtailment is higher than the 8.7 percent industrywide level, without giving the specific amount. That makes it harder to maintain safe operations in the cold winter months and fails to account for the ramp-up of its new Fort Hills mine as well as an output dip caused by an outage at the Syncrude oil sands project, Suncor said.

Suncor has fought the cuts since they were first proposed to help the industry cope with pipeline bottlenecks that pushed Canadian crude prices to record lows. Suncor, whose refineries were benefiting from the cheaper feedstock, hasn’t let up on the criticism since the reductions were announced this month. The company said Friday that they create “long-term market uncertainty” and reduce incentives to invest in refining capacity and commit to long-term transportation contracts.

“The Government of Alberta action has resulted in winners and losers in the market, shutting in valuable upgrading throughput and has made transporting crude oil out of the province by rail uneconomic,” the company said in a statement.

Suncor Confronts ‘Unintended Consequences’ of Alberta Oil Cuts

Including its estimate of the mandated production cut, Suncor is projecting total output next year of 780,000 to 820,000 barrels a day, an increase of about 10 percent from this year. The company is planning capital expenditures of C$4.9 billion to C$5.6 billion ($4.2 billion) in 2019, roughly in line with this year’s spending.

Calgary-based Suncor fell 1.9 percent to C$40.17 at 11:22 a.m. in Toronto. The shares had slid 11 percent this year through Thursday, compared with a 17 percent drop for the S&P/TSX Energy Index.

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