Oct 31 (Reuters) - Canada is losing the headquarters of major oil and gas producer Encana Corp to the United States, the latest blow to an industry crippled by a pipeline shortage, even as the Alberta government moved to stimulate crude shipping by rail.
The Western-based oil industry has been forced to curtail production this year, as proposed pipeline expansions stalled and stranded much of Alberta's oil from the U.S. refineries that buy it and depressed prices.
The slump has chased away foreign companies such as Devon Energy and ConocoPhillips, as well as investors, fuelling the criticism of Prime Minister Justin Trudeau who has failed to overcome opposition to new pipelines.
Encana, a company with Canadian roots stretching back to the late 1800s, said on Thursday it would establish its headquarters in the United States early next year, seeking to access larger pools of investment.
The company's exit, rumored for at least the past year, turned up the heat on Trudeau, who won no parliamentary seats this month in the oil-producing provinces of Alberta and Saskatchewan.
"The signal he has sent on the importance of oil and gas in Canada has been abysmal," Alberta Energy Minister Sonya Savage said at a news conference. "It's very difficult for investors to want to have confidence in Canada."
Shares of Encana were down 8.2% in afternoon trading in Toronto to C$5.08.
A spokeswoman for outgoing Canadian Natural Resources Minister Amarjeet Sohi said in a statement that Encana's departure highlighted why the Liberal government has tried to attract investment by pushing for new pipelines and strengthening rules for project reviews.
Canada, under Trudeau, bought the Trans Mountain oil pipeline here last year in an attempt to expand it, and supported a liquefied natural gas export terminal for British Columbia. In this month's election, however, Trudeau's Liberal government was reduced to minority status, and will now depend on smaller parties such as the anti-pipeline New Democrats to survive.
Encana plans to adopt a new name, Ovintiv Inc, with its move to the United States.
"This is a tragedy for Canada," said Alex Pourbaix, chief executive of oil producer Cenovus Energy, which was spun off from Encana here in 2009. "We've got to remain very, very focused on how competitive conditions are for our industries."
The energy sector accounts for 8.6% of Canada's gross domestic product, Statistics Canada data shows, and employs 267,000 people.
Shares of Canadian oil producers dropped on Thursday, along with the North American crude benchmark price. Encana stock led the way down, shedding 9% in Toronto.
Alberta, which introduced mandatory oil production curtailments from Jan. 1 this year to ease congestion on export pipelines, said it would allow companies to produce additional oil if they move it by rail, in a bid to stimulate investment.
Suncor Chief Executive Mark Little said the company planned to move an additional 30,000 barrels per day (bpd) by rail within a couple of months, and estimated there is additional crude by rail capacity of 200,000 bpd to 300,000 bpd available.
"This is a very positive development because the whole purpose of curtailment was to reduce production to align with takeaway capacity," Little said on a quarterly conference call. "When everybody has all their production flowing, then they're (incentivized) to grow their production."
Railways moved 310,146 barrels of oil per day in August, according to the most recent data from the Canada Energy Regulator, up 35% on the year, but shy of a record 353,789 bpd moved in December.
With export channels full, the industry can afford few pipeline outages. The 590,000-barrel-per-day Keystone crude pipeline from Alberta was shut after a leak this week of some 9,120 barrels in North Dakota, further hemming in Canadian output.
The industry's volatility has already hit some of Canada's biggest producers. Suncor and Husky Energy have posted sharply lower third-quarter profits, while Cenovus swung to profit as the government's output curbs stabilized prices.
Oil and gas investment looks to fall further next year, an industry group warned.
Canada will see a 10% drop in wells drilled in 2020, as producers choose instead to repay debt or buy back shares, the Petroleum Services Association of Canada (PSAC) predicted on Thursday.
"It’s hard to justify spending or attract new capital investment when market access constraints remain and policy uncertainty persists," PSAC Chief Executive Gary Mar said.
Reporting by Rod Nickel in Winnipeg, Manitoba and Shariq Khan in Bengaluru; additional reporting by Shanti S Nair in Bengaluru and Kelsey Johnson in Ottawa, Editing by Bernadette Baum and Bill Berkrot