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Canada’s Oil Output to Increase, But Not as Much, in 2015 and 2016

A 19% cut in industry spending is expected to pare production growth this year and next, the Canadian Association of Petroleum Producers (CAPP) predicted Wednesday.

Western Canadian oil output will increase this year by 150,000 b/d to 3.6 million b/d, then add another 150,000 b/d in 2016, the industry group said. CAPP members account for about 90% of Canadian production.

Overall, CAPP forecasts a 19% cut in industry spending this year to C$46 billion (US$38.6 billion) from C$69 billion ($58 billion) in 2014.

The spending cuts are expected to lop 65,000 b/d off a previously more bullish CAPP production growth forecast for 2015 and 120,000 b/d off expectations for 2016.

Big oilsands production investments are forecast to be set back, dropping by 25% to C$25 billion ($21 billion) from C$33 billion in 2014.

In Canada the pain inflicted by glutted international markets will be concentrated in drilling for smaller supply targets, where CAPP predicted a 42% industry spending cut this year to C$21 billion ($17.6 billion) from C$36 billion ($30.2 billion) in 2014.

“Conventional oil production is flat at 1.3 million b/d in 2015, and oilsands production increases to 2.3 million b/d due to projects coming on stream from prior-year investments,” according to the new “challenging times” forecast by CAPP. “This production growth underscores the ongoing need for market diversity and increased transportation capacity.”

New pipelines to carry growing production will continue to top the Canadian oil and gas industry’s agenda this year despite fallen oil prices and reduced corporate budgets.

CAPP President Tim McMillan added, "No question, the effects on the industry are sharp but we continue to need all forms of transportation in all directions -- pipelines in particular -- as our industry continues to grow in the years ahead."

On top of the delayed Keystone XL Pipeline express route from Alberta to refineries on the Gulf Coast, the project lineup includes three proposals for oil conduits to Pacific and Atlantic tanker ports and three jumbo lines to fill 18 liquefied natural gas export terminals proposed for Canada’s Pacific Coast.

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