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Boston, MA -- (SBWire) -- 04/14/2014 --Increasingly challenging economics could slow the growth of oil-sands driven production, although we note that liquids-rich shales could be the new engine of liquid output growth. Exploration in the country's offshore acreage and unconventional resources could unearth more oil and gas reserves to support the country's long-term growth prospects. The outlook for Canada's oil and gas industry is still a positive one, though its upstream potential needs more support from the community and the government for infrastructure development.

The main trends and developments we highlight for Canada's oil and gas sector are:

- The abundance of gas production provides Canada with considerable export potential. More LNG export projects continue to emerge, with Kitsault Energy and a consortium led by Nexen the latest companies to file for an export application from a British Columbia (BC) site.
- Canada's oil and gas infrastructure face bottlenecks that need to be addressed to move oil and gas more effectively across the country, and out of it. Otherwise, the country will be faced with the paradox of being over-supplied with oil and gas, but prevented from exporting these due to the supply shortages that exports could pose to the domestic consumption needs of particular regions of the country. The approval of TransCanada's 1.1mn barrel (bbl) Energy East pipeline would increase the flow of western Canadian crude to the Eastern refining centres.
- We are seeing a growing trend of crude-by-rail shipments to circumvent the limitations in pipeline capacity. Strong growth in Canadian crude exports by rail is playing a critical role in transporting heavy crude produced from oil sands to the refineries on the US Gulf Coast configured to process it. This alternative mid-stream route will see strong short-term growth, at least until an alternative pipeline solution is found.
- We continue to see a threat to growing oil reserves from oil sands projects. Due to the boom in light, sweet crude production in the US, demand for heavier Canadian crudes from oil sands has fallen. Complicated by infrastructure bottlenecks that are limiting crude flows, this has widened the discount between the prices of Canadian crudes and WTI, which has in turn hit the economics of oil sands projects.
- Canada's proven oil reserves are expected to fall from 171.9bn bbl at the beginning of 2013 to 167.1bn bbl in 2018 due to a slowdown in oil sands investment, but should stagnate at around this level thanks to additions from liquids-rich shale developments, particularly Montney and Duvernay.
- Total Canadian liquids supply (crude oil, condensate, NGLs and other liquids) in 2012 was 3.78mn b/d, with volumes growth of about 150,000b/d estimated in 2013. In the longer term, production growth will be driven by new projects both conventional and unconventional to an estimated 4.43mn b/d in 2018 and 4.74mn b/d by 2023.

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