Over the next 11 years, Canada's oil industry is likely to produce 500,000 barrels a day less than was forecast a year ago, the Canadian Association of Petroleum Producers (CAPP) said Friday.

The forecast for the oilsands has dropped even further, the industry group said in an annual report on expected future production.

Even under the industry group's "growth case," which assumes the investment climate will get better, oilsands production is expected to reach only 2.9 million barrels a day (bbl/d) by 2020 — down from 3.5 million bbl/d in the 2008 forecast.

For the oilsands, the weakened economy and difficulty finding capital mean "the pace of development has slowed,” said Greg Stringham, CAPP’s vice-president of markets and oilsands.

Under the "minimum growth outlook," which includes only projects currently operating or under construction, oilsands production will reach just two million bbl/d by 2020, the group said in its annual forecast report.

For the industry as a whole, which includes conventional, oilsands and offshore production, the growth case foresees production of four million bbl/d in 2020, and the minimum case three million. Last year's forecast was 4.5 million bbl/d.

The report said the outlook for major pipeline projects is not good over the near term. Lines now under construction will add over one million bbl/d to capacity leaving western Canada by the end of next year, but production is not expected to rise by that amount until 2016.

"Current pipeline capacity underway or in the regulatory process will provide excess capacity for a number of years and sufficient pipeline capacity available exiting Western Canada throughout the planned forecast period," the report said.

The report was based on a survey of producers done earlier this year.