Oil companies will look to fill up as much storage as possible before shut-ins of cold flow and conventional wells in the area, said Reeve Greg Sawchuk following his meeting with the Canadian Association of Petroleum Producers on Thursday.
The demand of oil worldwide has dropped 70 million barrels per day, approximately five times what Canada produces in a day, he said.
The prices of Western Canadian Select and West Texas Intermediate have taken plunges within the past two weeks making it much more costly to producers.
Sawchuk relayed that all supertankers have been leased out to fill up storage.
“First off, it’s going to go into storage. So you’re gonna see all the old companies filling up their tanks,” said Sawchuk.
“What we’re likely to see coming up is a further shutting in of the cold flow wells, conventional wells in our area for sure. You’ll see that and beyond that, you’re looking at the oil sands. And last would be of course, your SAGD, which is the hardest to shut down.
“They’re working on, of course, the safety of not only their employees but the regulators and those folks who are out there to provide service to them. That’s short term.”
The current price war between Russia and Saudi Arabia coinciding with the COVID-19 pandemic has created uncertainty in the short term.
Canadian companies are already lean having cut production costs over the past five years.
Long term, these companies will be looking at what to do for economic stimulus, said Sawchuk.
“This is where I think you’re going to see municipalities as well getting involved with the province to say, we’ve got these things, we’re ready to go.
“One of the things they were putting forward right away is that work on the orphan wells. These are basically shovel ready. There’s, of course, hundreds of them out there that would put back to work some of that heavy equipment which is needed for the reclamation. That’s the piece that they’re putting forward.”
The Alberta Government passed Bill 12 on Thursday, which expands the government’s power to maintain, sell, or close oil and gas wells that have lost their owners to bankruptcy.
They also partnered with TC Energy on the Keystone XL Pipeline to the tune of $1.5 billion to start construction right away.
“CAPP figures that they’re in a good place to survive this and going forward. They’re looking quite profitable if you’re looking out a few years.
“Short term, they’re probably going to be looking for help from not only the provincial government, federal government, but also municipalities.
“On a municipal standpoint, it came out that we have a ton of highways and infrastructure that is in great need of repair. And we keep, along with all the other leaders up here, we keep bringing up Highway 28 all the way to Edmonton is horrible.”