Canada’s prolific oil reserves are gold mines for the country, considering it contains the largest oil resources in North America. But geographic hurdles, infrastructure and regulations are diminishing Canada’s shine, according to Deloitte’s “Challenges and Opportunities for Canada’s E&P Sector” report issued on Sept. 11.

“The U.S. has been the only game in town, but really opening up other markets outside of North America would be very important to expanding the potential in Canada,” Andrew Slaughter, executive director for Deloitte’s Center for Energy Solutions, said.

Canada’s lack of access to international markets has substantially hindered its ability to grow, according to the report. With production more than doubling over the last 10 years in Canada, export capacity has grown crucial for its upstream and midstream industries.

“If they don’t get more export outlets into the Pacific or the Atlantic, then Canadian producers will continue to see depressed prices for quite some time to come and that will cause a slowdown in investment and it’ll be tougher to take FID on capacity expansions in oil sands,” he said. “There will be a competitive disadvantage.”

Going hand in hand with this issue—and forming a risk to Canada’s success on its own—is infrastructure. The report found that Canada exports roughly 3.3 million barrels per day of liquids, with the majority going to the U.S., while importing only 600,000 barrels per day. These export levels warrant the development of more midstream infrastructure considering the heavy focus on the export market by Canadian producers, according to the report.

“Infrastructure is absolutely vital for Canada to have access to U.S. markets now, and in the future, to other international markets like Asia and Europe,” Slaughter said. “These problems have been disguised over the last two or three years because there was a wave of investment in terms of capacity building.”

Furthermore, to spur its unconventional production growth Canada needs infrastructure that spans farther than its border. Considering Canadian production is much higher than Canadian demand, the report states that export terminals across the border and in the U.S. would alleviate the oversupply issue.

But, environmentalists and regulations have caused serious hiccups to existing and new infrastructure developments. In August, the Federal Court of Appeal reversed the Canadian government’s approval for the Trans Mountain Pipeline expansion project. The decision, an indefinite halt, was a win for indigenous groups that argued they were not adequately consulted by the government regarding the pipeline.

“It’s a complex negotiation with First Nations groups particularly along pipeline routes and there are a lot of different stakeholders which have to be aligned,” Slaughter said. “It’s a more complex process than we get in the U.S., so it’s taking longer and is a lot more complicated and that’s part of the reason these price discounts are getting so deep.

“There’s a delay in upstream development and adequate pipeline infrastructure tends to be even longer. Companies have to be very careful navigating the provisional and the national regulatory agencies.”

Still, with one-third of the world oil reserves—173 billion barrels—the report finds that Canada is a very attractive site for global investment despite issues and oil sands contribute to that allure as it is Canada’s single largest source of production.

“If you look at the shale plays, Canada has some world-class plays like the Montney and the Duvernay. They have gas and liquids, and particularly, the gas piece of it could go faster if or when we get some of these west coast LNG export facilities developed,” Slaughter said. “Obviously that would mean a new market and accelerated development of plays in northwestern Alberta and northeast British Columbia. But, there’s really substantial resources and substantial potential.”

While the development of shale hasn’t reached the level of oil sands despite being plentiful throughout Canada, Deloitte analysts believe that once tapped into Canadian shale will more than compete with the U.S. According to the report, addressing the rig disparity between the two places where more than 800 rigs were deployed in the U.S. to Canada’s 200, would transform production volumes for Canada’s future.

“Canada is rather unique with the diversity of its oil and gas resources and potential. It’s a good contrast to countries like Brazil that’s more dominated by one sort of play. Canada has a very interesting story and certainly a lot of potential.”

Mary Holcomb can be reached at