Canadian oil sector may lean on rail

Oil producers in Canada will look to rail to carry reserves to U.S. refiners and Asian markets, the director of the Canadian Energy Research Institute said.

Beth Lau, an oil supply manager at the Canadian Association of Petroleum Producers, said crude oil output is expected to reach 3.9 million barrels per day in 2015, a 500,000 bpd per day increase from previous levels. Most of that production would come from oil sands operations in Alberta province.

"Oil sands production is growing by an average 10 percent each year, and we also see a reversal in the trend for conventional output, with more light barrels being produced," she told an energy conference in Calgary.

Though energy companies in Canada are working on new pipeline capacity, they likely won't be online by 2015. Peter Howard, director of the Canadian Energy Research Institute, said rail will have to take up the slack.

"The onus will rest to a significant extent on rail to carry it through," he said. "Rail will carry Western Canadian crude to the United States, but producers in Alberta and Saskatchewan are targeting markets in Asia that will fetch higher prices."

Accelerating oil production from North America in general has forced energy companies to rely on rail. The rail sector's safety record is under review, however, following a series of derailments of railcars carrying crude oil.