June 12, 2018 / 11:04 PM / 2 years ago

Canada oil output to rise 33 pct by 2035, pipeline woes weigh

June 12 (Reuters) - Canada's oil output is set to rise 33 percent by 2035, driven almost entirely by higher oil sands production, but without new export pipelines Canadian producers will continue to be excluded from emerging markets, an industry group said on Tuesday.

In its annual forecast, the Canadian Association of Petroleum Producers (CAPP) also warned that Canada's inability to get new crude export pipelines built, along with regulatory uncertainty, was weighing on investor confidence.

"The competition for capital investment in the global marketplace is fierce and Canada is losing," CAPP Chief Executive Tim McMillan said in a statement.

Despite the challenges, CAPP said Canadian output would rise to 5.6 million barrels per day (bpd) in 2035, compared with 4.2 million bpd in 2017, driven largely by a 58.5 percent jump in oil sand production to 4.2 million bpd.

Western Canada accounts for roughly 95 percent of Canada's oil production, with the bulk coming from Alberta's oil sands, but an exodus of international oil majors has prompted doubts over whether the region can compete with U.S. shale plays.

Indeed, capital spending on oil projects in the United States rose 38 percent to hit $120 billion in 2017, while investment in Canada dropped to C$45 billion ($34.6 billion), CAPP said.

Efforts to build new pipelines to the coast to tap into emerging markets like China and India have so far failed. Canada sends roughly 99 percent of its oil to the United States, most of it deeply discounted against the U.S. benchmark price.

The last great hope for expanded access to offshore markets is the Trans Mountain expansion, which the Canadian government in May agreed to buy for C$4.5 billion from Kinder Morgan Canada . The project would nearly triple output on the existing line from Alberta to a Vancouver-area port, but is strongly opposed by the province of British Columbia.

With Canadian oil output already surpassing pipe capacity, pipeline operators are also looking to expand major export lines to the United States, but those projects face their own political and regulatory hurdles.

$1 = 1.3020 Canadian dollars Reporting by Julie Gordon in Vancouver Editing by Tom Brown

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