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Canada's oil, gas output hampered by pinched export capacity, report says

A report by the group representing Canada's biggest oil and gas producers said export transportation infrastructure is a top priority as the nation's output is expected to surge in the next three decades.

The report from the Canadian Association of Petroleum Producers, or CAPP, urged Canada's government to remove impediments to pipeline construction and tanker ship travel. The group said new pipelines would enable exports from the nation's west coast as oil sands production rises to a forecast 5.6 million barrels per day by 2035 from about 3.2 million bbl/d in 2017. The group recommended removing a proposed oil tanker ban along the British Columbia coast and a substantial revamp of a plan to replace the National Energy Board, Canada's energy regulator, with two separate agencies.

Titled "Leveraging Opportunities: Diversifying Canada's Oil and Natural Gas Markets," the report also said Canada's government needs to move ahead with the expansion of its Trans Mountain Corp. pipeline, which has been delayed by a court challenge. Expansion of the pipeline between the oil sands region in Alberta and a marine port near Vancouver, British Columbia, "is critical infrastructure needed to move Canadian energy to world markets and help restore investor confidence in Canada's economy and political system," the report said.

CAPP raised the concern that the pipeline expansion might continue to languish even after the government bought the pipeline network from Kinder Morgan Inc. for C$4.5 billion in an effort to push construction forward. The report said "there is still no assurance the pipeline will be built, due to ongoing delays from political interference, court challenges and opposition from some activist and Indigenous groups."

The group expressed its ongoing support for Enbridge Inc.'s Line 3 replacement, which would add about 360,000 bbl/d to Canada's oil export capacity, and the 830,000 bbl/d Keystone XL project proposed by TransCanada Corp. Both projects have been bogged down by regulatory delays and court challenges in the U.S.

"Numerous studies have indicated significant and ongoing impacts to Canada's economy resulting from pipeline delays," the report said.

The report said the nation's natural gas production could increase to 25 Bcf/d by 2037 from about 15.4 Bcf/d in 2017 if LNG export facilities and other projects proceed. It suggested that the federal government should lobby for international recognition of relatively low emissions from its planned West Coast LNG terminals and seek credit from international bodies for reducing emissions in consumer nations that deploy the fuel to replace coal and other more-polluting fuels for power generation.

Canada has one export facility under construction, the Royal Dutch Shell plc-led LNG Canada Development Inc. project on British Columbia's northern coast. The report noted that Exxon Mobil Corp. withdrew its application for a similar facility after waiting almost four years for a federal environmental assessment. The report listed four LNG projects that are actively being pursued in addition to LNG Canada, while noting that 15 projects have been cancelled in recent years.