Boston, MA -- (SBWIRE) -- 08/30/2012 -- BMI View: Production from oil sands will continue to drive Canada's oil production growth. However, exploration in Canada's offshore acreage and unconventional resources could prove-up 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 rosy one, though Canada's upstream potential needs more support from infrastructure development.

The main trends and developments we highlight for Canada's Oil and Gas sector are:

- Oil production growth will be mainly driven by production from Canada's oil sands, as projects including ConocoPhilips and Total's Surmount and Total's Joslyn North oil sands in Alberta come online and Shell increases output at its Abathasca Oil Sands Project. We expect oil production to increase from an estimated 3.71mn barrels per day (b/d) in 2012 to 4.40mn b/d in 2016. By 2021, total oil production could hit 4.97mn b/d.
- Cheap oil prices from the abundance of local supply will benefit refiners in western Canada, which have easier access to oil sands output concentrated in Alberta. Proposed pipeline programmes by TransCanada and Enbridge, which would allow for the delivery of cheaper western crude to refineries in eastern Canada, could reduce feedstock costs for these refineries traditionally dependent on expensive crude imports. This is provided that eastern refineries have the facilities to process the heavier western crude oil.
- Gas production will initially decrease as existing conventional gas resources deplete, falling from an estimated 155.1bcm in 2012 to 152.3bcm in 2014. Thereafter, this trend will reverse as the commercial production of shale gas gradually comes onto the market; gas supply will increase to 155.3bcm in 2016, and reach 164.1bcm by 2021.
- While gas consumption growth will be relatively flat at the consumer level, rising energy use at the oil sands facilities continues to push total gas forward, as much of the oil sands production needs will be powered by gas. Gas consumption is set to grow from 86.4bcm in 2012 to 97.0bcm in 2016. This upward trend will continue, with gas consumption expected to hit 109.9bcm by 2021.
- While existing oil and gas reserves continue to deplete as fields mature, successes in unconventional and offshore exploration could prove-up reserves, posing an upside risk to our forecasts.
- Asian companies such as Korea Gas Corporation (Kogas), Mitsubishi Corporation and PetroChina have been particularly interested in acquiring unconventional gas assets in Canada. We expect Canada to continue receiving interest from Asian-based companies in gas assets and gas infrastructure.

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