From Bloomberg
The Canadian government announced C$1.5 billion ($1.1 billion) in loans for the oil and gas sector, as well as some government funding for unspecified projects, after a supply glut sank heavy crude prices to as low as $13.46 a barrel last month.
The country’s energy and trade ministers announced the aid package Tuesday morning in Edmonton. It includes “commercial financial support” loans of C$1 billion from Export Development Canada, and C$500 million in commercial financing from the Business Development Bank of Canada. The funds are available immediately.
The EDC money will be aimed at exporters, including those who have “working capital needs,” while the C$500 million will be for “higher risk but viable oil and gas small business enterprises,” and be spread over three years, according to a government statement.
“All in all, it has to do with liquidity,” Trade Minister Jim Carr said at a press conference. The loan money can augment oil producers’ relationship with commercial banks and “will go a long way in helping them get through this tough spot.”
The liquidity injection is aimed at producers pinched when the price of heavy crude plunged in what Prime Minister Justin Trudeau called a crisis. Since then, the province announced a production cut and heavy crude prices have almost doubled, though global oil prices remain depressed.
However, the announcement doesn’t offer support for the Alberta government’s plan to buy its own rail cars. Another phase of federal measures could also be announced later, one person familiar with the plans said, speaking on condition of anonymity.
Inaction
Trudeau has been criticized in the oil-producing province for inaction on building new pipelines, a shortage that exacerbated the supply glut. His last visit to the province was met by protests.
“We’re not really seeing anything that’s concrete in the short term,” Bank of Montreal analyst Randy Ollenberger told BNN in an interview, referring to Tuesday’s measures. “While C$1.5 billion sounds like a big number, the industry spends C$50 billion, C$60 billion a year in the good times, and that’s really what creates jobs.”
The government also announced C$100 million in funding for oil and gas projects related to economic diversification, as well as C$50 million in direct funding for “clean growth” oil and gas projects. “We encourage companies to apply for it,” Resources Minister Amarjeet Sohi said at the same press conference. Those projects haven’t yet been publicly identified, though Sohi said the government has some proposals already. The total announcement is worth C$1.65 billion, mostly in the form of loans.
