November 26, 2012 / 8:52 PM / 7 years ago

UPDATE 2-High demand means world needs all of Canada's oil -IEA

* IEA says despite rising output, US still needs Canada oil

* Canada should focus on boosting exports to Asia, IEA says

By David Ljunggren

OTTAWA, Nov 26 (Reuters) - Global demand for crude is growing so strongly that the world needs “every single drop of Canadian oil,” the International Energy Agency’s chief economist said on Monday, playing down fears that growing U.S. production could hit Canadian exports.

Fatih Birol said that even if U.S. output rises as much as the agency expects, the country would still need to import four million barrels a day and that Canada is an obvious supplier.

In its annual forecast this month, the IEA said the United States could come close to energy self-sufficiency by 2035, largely because of the boom in development of unconventional light oil resources.

Canada is the single largest supplier of energy to the United States, sending around 2 million barrels a day to its southern neighbor.

Much of the Canadian crude comes from Alberta’s oil-rich tar sands, where operating costs are higher than in regular fields, and the IEA’s forecast prompted fears that the biggest export market for the oil sands could shrink.  But Birol, asked about potential risks for the oil sands if U.S. output rose, said he did not see any.

“I don’t think so... Oil demand is growing so strongly worldwide that I think the world needs every single drop of Canadian oil,” he told reporters after giving a presentation in Ottawa on the annual IEA forecast.

“The U.S. will still need to import about 4 million barrels per day of oil, and this oil will have to come from somewhere, and I believe Canada will be a primary destination (for supplies) to the United States.”

In its forecast, the IEA said oil sands output was expected to nearly triple to 4.3 million barrels a day by 2035, assuming environmental concerns about development can be addressed.

U.S. President Barack Obama said in January he would postpone a decision until 2013 on whether to approve a plan by TransCanada Corp to build a pipeline from the tar sands to the Gulf of Mexico. Green groups strongly oppose the project.

Birol also said Canada should keep pursuing Asia as the next major market for its growing supplies of oil sands-derived crude. Canada’s Conservative government is trying to boost the country’s current negligible oil shipments to China, in part by making it easier for pipelines to be built to Pacific ports.

Proposals to get oil sands crude to the West Coast, led by Enbridge Inc’s C$6 billion ($6.1 billion) Northern Gateway pipeline, face opposition from environmentalists and some native groups, which warn of risks of oil spills on land and in coastal waters.

Birol declined to comment specifically on the Northern Gateway case but added: “Looking at it only from an economic perspective, it makes perfect sense to me that Canada exports its oil and gas to Asia... But of course this has to be done in a sustainable manner.”

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