Rising Canadian supply to increase oil-by-rail need, study finds

Mon Mar 25, 2013 4:43pm EDT
 
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* Canadian oil production to reach 5.7 million bpd by 2025

* Gross production to increase by 78,000 bpd monthly by 2017

* Growth will squeeze pipeline capacity even with new lines

* Rail capacity needed to take additional crude

CALGARY, Alberta, March 25 (Reuters) - Canadian oil production will nearly double by 2025, according to a study released on Monday, with rising output continuing to push past available pipeline space and increasing the need to ship crude by rail.

The report, by ITG Investment Research, forecasts Western Canadian oil production will rise to 5.7 million barrels per day by the middle of the next decade from a current rate of about 3 million bpd, with most of the increase from the country's oil sands producers.

ITG predicts that by 2017, Canadian oil producers will be adding about 78,000 bpd per month of new oil supplies before accounting for declining production at existing facilities, up from about 63,000 bpd last year.

But those production gains are likely to further squeeze available pipeline space even if new pipelines like TransCanada Corp's contentious Keystone XL project, Enbridge Inc's Northern Gateway line and others are built.

ITG says that production in Western Canada and the U.S. Bakken and Rocky Mountain regions will grow faster than the planned new lines can be completed. Oil-by-rail capacity in the three areas will have to climb from about one million barrels per day of existing and planned space to 1.6 million bpd by 2017 to keep up with the growth.

However if the new pipelines fail to be approved and built, the amount of oil being shipped by rail would need to expand dramatically, rising to about 2.5 million bpd by 2019.

"Something has to take all that oil away," said Samir Kayande, vice-president, energy, at ITG and one of the authors of the study. "If you don't get any new pipelines the amount (shipped by) rail has to go up."