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Approval Of Keystone Pipeline Only Part Of The Solution For Canada's Energy Sector: CIBC

As a result, Canada's traditional advantage from being right next to the world's largest oil importer is unlikely to last much longer. In fact, it is forecast that China will displace the U.S. as the world's top importer of oil in 2013. Only a decade ago, the country produced more oil than it consumed.

"The world will still need Canada's crude, given still ample demand growth ahead for Asia, and we doubt supply-demand conditions will permanently sustain prices below Canadian project break-evens," says Mr. Shenfeld. "But it's increasingly important that Canada move on one or more of the alternative pipelines to get our product headed Asia's way. Canada's own central and eastern oil markets are another option, but longer term demand growth there is also likely to be lackluster."

The report notes that global competition is also changing the energy sector with countries like Iraq, Mexico and Venezuela now focused on developing production for export.

" Canada was once among only a handful of countries welcoming foreign capital in the oil sector," writes Peter Buchanan, a senior economist at CIBC, in the report. "Just over a decade ago, nearly three-quarters of global oil reserves were effectively off limits to major global players, due to state-run firms, outright prohibitions, security or other considerations."

He notes that today, there are many places seeking investment to develop and expand production. Not only in the U.S., but now Iraq is rebuilding, Mexico is looking more open to inflows of foreign capital and expertise, and the winds of political change could at some point see the same swing in Venezuela.

Mr. Shenfeld believes that clarity on the pipeline front is critical to attracting the capital—both domestic and foreign—needed to finance the growth in Canadian production. He also believes governments will need to do more to bring in needed investment.

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