CALGARY, Alberta, Nov 21 (Reuters) - Canadian oil production will rise by nearly 75 percent to 5.8 million barrels per day by 2035, the country's National Energy Board (NEB) said in a report on Thursday, assuming the infrastructure is built to transport crude to export markets.
The NEB, Canada's energy regulator, said the discount on Canadian crude versus the West Texas Intermediate benchmark will likely remain volatile if extra takeaway capacity is not built, potentially affecting production growth.
Congested pipelines and booming production mean Canadian crude tends to get bottlenecked in Alberta, pushing prices lower.
Western Canada Select, the benchmark heavy crude blend, traded as low as $41.50 per barrel below WTI earlier this month. Throughout 2011 and 2012 the WCS price traded on average nearly $19 per barrel below the WTI.
"A key assumption in this analysis is that there will be sufficient infrastructure to deliver Canadian oil production to export markets," the NEB said in its "Canada's Energy Future 2013" report.
"If this is not the case, there may be impacts on Canadian crude oil prices...and there may be implications for future production growth."
The report said the use of rail to transport crude out of Canada was small but growing, and producers were likely to ship more crude by rail if extra pipeline capacity out Western Canada is not built and differentials widen.
In 2012, rail cars shipping fuel oil and crude petroleum went from approximately 3,000 cars to 8,000 by the end of the year according to Statistics Canada.
In the near term, the NEB said higher oil prices and lower natural gas prices would encourage more oil-directed drilling and oil sands activity continued to be robust.
By 2035 output from the oil sands of northern Alberta, home to Canada's vast bitumen reserves, are expected to account for 86 percent of production, compared with 57 percent in 2012.
The NEB's forecast of oil sands output hitting 5 million bpd by 2035 is conservative compared to the Canadian Association of Petroleum Producers, which expects the oil sands to be producing 5.2 million barrels per day by 2030.
Most of that bitumen will be extracted using in-situ thermal projects, where steam is pumped into the ground to liquefy the tar-like bitumen trapped in the sands so it can be pumped to the surface, the NEB said.
Natural gas production is expected to rise by 25 percent over the same period, led by higher levels of tight and shale gas development.
(Reporting by Nia Williams; Editing by Bob Burgdorfer)
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