Total Canadian oil production is expected to increase by two-thirds by 2025, with the oilsands contributing a growing share of the total, the Canadian Association of Petroleum Producers said Thursday.

The industry group's annual forecast is predicting production of 4.7 million barrels of oil a day by 2025, up from 2.8 million in 2010.

The oilsands will account for more than three-quarters of 2025 production (3.7 million barrels/day), up from just over half (1.5 million b/d) last year.

Canadian oil production, million barrels/day

   2010 2015 2020 2025
 Total  2.8  3.4  4.2  4.7
 Oilsands  1.5  2.2  3.0  3.7
 Source: CAPP

The 2011 forecast is similar to 2010's for the first half, but is higher from 2019 to 2025. "This is the result of a more accelerated startup of production phases and the revival of certain development projects that had previously been put on hold," and higher conventional production, it said.

By 2025, production will be 385,000 barrels a day above the 2010 forecast.

CAPP estimated oilsands capital spending will be $16 billion in 2011, compared with $13 billion in 2010.

Despite the increase, however, the forecast is still below the prediction in 2008. And crude producers are facing challenges in getting their output to market.

Asian demand is expected to grow "substantially," but the industry needs additional pipeline capacity to the West Coast to take advantage of that market, the report said.

The U.S. Midwest market, which is well connected to western Canadian production, is growing, but producers want to sell into the U.S. Gulf Coast, "the largest refining market in the world."

There are proposals to increase or build new pipeline capacity to carry Canadian oil to the Pacific for export to Asia and south to the Gulf. Making sales there "would provide an outlet for the current oversupply of Canadian and U.S. crude that has been building in the U.S. Midwest," the report said.

U.S. western states California and Washington might also become Canadian markets. "The refineries in this market get the majority of their crude oil supplies from California and Alaska and production from these states has been steadily declining," the report said.

The report does not predict prices but there is an expectation for continued strong prices. One standard measure, the price per barrel for West Texas Intermediate, averaged $80 US in 2010 but has recently been around $100.

The report concentrates on Western Canada, but noted that 11 per cent of Canadian production comes from Atlantic Canada.

CAPP said it surveyed all oilsands producers this year to develop the forecast.