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Canada hit hard by falling oil prices

Canadian oil production is expected to drop by more than 100,000 barrels per day because of slumping oil prices, an industry group forecasts.

The Canadian Association of Petroleum Producers said in a short-term review it expects oil production to decline by 65,000 bpd this year and 120,000 bpd in 2016.

CAPP President Tim McMillan said weak oil prices present a challenge across a wide range of sectors and economies in Canada.

"Investors have seen their portfolios shrink. And governments will see reduced revenues from the industry's royalty and tax payments," he said in a Wednesday statement. "We all will feel the effects."

Because of the complexities involved with bringing some of the more viscous forms of Canadian crude oil to the surface, production is among the more expensive operations in the industry.

McMillan said the slump in production means a diverse customer base is a growing importance for the industry.

Nearly all of the Canadian oil and gas exports target the U.S. market. Government leaders have said tapping into the energy-hungry Asian market is a top priority, while those in the industry are pressing for more coastal access through oil pipeline networks. The high-profile Keystone XL oil pipeline would bring oil from Alberta to refineries along the southern U.S. coast.

"No question, the effects on the industry are sharp but we continue to need all forms of transportation in all directions -- pipelines in particular -- as our industry continues to grow in the years ahead," McMillan said.

CAPP estimates the oil and gas industry pays more than $14.5 billion in taxes and royalties to the federal government per year. Energy companies make up about 20 percent of those listed on the Toronto Stock Exchange.

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