Oil sector burns as Ottawa fiddles over aid package
A federal aid package for struggling Canadian energy firms has run into weeks of delays, in part because officials are still trying to obtain up-to-date data, according to three sources familiar with the matter.
The oil and gas sector in Alberta, home to the world’s third-largest crude reserves, has been hard hit by plummeting crude prices due to low demand and excess supply from Saudi Arabia and Russia.
Smaller energy firms are seen as particularly vulnerable to the historic decline in prices.
Finance Minister Bill Morneau said on March 18 that Ottawa was working with Alberta on support for energy industry workers and promised to announce a significant investment to clean up wells with no legal owner “in the coming days.”
There has been no tangible sign of help yet, however, as Ottawa struggles to quantify the extent of the challenge.
“We are not walking back anything we have committed to. It’s just more about getting it right … it’s hard to be able to give a timeline with certainty,” one source, who requested anonymity given the sensitivity of the situation, told Reuters.
The source said the picture on the ground was very fluid as oil prices keep dropping while inventories build up.
“There are a lot of complicated questions around all of that. (There are) also overlapping jurisdictions, so we have to work especially closely with the provinces,” the source said.
A second source said the situation in energy-producing provinces was so fluid that officials had to continuously update their projections.
Apart from the energy sector, there has yet to be any sign of the aid packages Ottawa has also promised the airline and tourism industries.
A third source, speaking about the energy sector aid, said a big challenge involved wrapping up details of the wage subsidies meant to support workers during the industry downturn.
“So there’s a lot of people not getting a lot of sleep right now,” the source told Reuters.
Western Canada Select heavy crude for May delivery in Alberta traded on Wednesday at a net price below $5 per barrel, among the lowest on record.
Ottawa is considering ways to backstop banks to ensure they allow oil companies to access existing and new lines of credit, preventing massive job losses, sources said last week.
“There is no other button to push than layoffs,” said Duncan Au, chief executive at oil service company CWC Energy Services Corp , which has laid off nearly a fifth of its staff and cut salaries by 10 per cent.