Oil Companies Are Selling Each Other Rights to Pump in Alberta

(Bloomberg) -- Alberta oil producers have found a way around production limits imposed on them by the provincial government: buy the right to pump barrels from other companies that don’t need them.

The volumes aren’t huge -- Husky Energy Inc. is buying rights to produce an additional amount of less than 1,000 barrels a day, Rob Symonds, chief operating officer, said Tuesday in an investor call. It’s not a transparent market, mostly operating “by people phoning people,” Robert Peabody, chief executive officer, said in the call.

“It is a company-to-company market,” Symonds said. “It’s personal contracts.”

Alberta’s government imposed production limits on producers starting this year to alleviate an oil glut caused by a lack of pipelines that sent heavy Canadian crude plunging in October to $50 a barrel below benchmark West Texas Intermediate futures. The province announced it would eased the curtailments last month as prices strengthened to an extent that shipping crude by rail became less economic.

Husky can’t disclose which company it bought barrels from for confidentiality reasons, Spokesman Mel Duvall said in an email. The curtailments apply to 28 producers that pump 10,000 barrels a day or more.

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