The future of Canadian oil sands hinges on finding new markets that can help the heavy crude escape competition with tight oil supplies from the United States, according to a new report.

The assessment, authored by consultant IHS CERA with input from Canadian oil sands players, underscores constraints and delays that could drag down the growth trajectory of oil sands development, including competition with U.S. shale oil production that has a lower greenhouse gas footprint and is better linked to export markets.

"Tight oil is reshaping opportunities for oil sands in the United States and prompting Canadian industry and governments to seek new sources of demand in the United States, offshore and elsewhere in Canada," the report says.

Describing tight oil sourced from shale, tight sands and tight carbonites as one pillar and oil sands as the second in a "great revival" of North American crude production, the report notes that they nonetheless compete in certain markets and have interconnected pricing.

U.S. tight oil is currently selling at a discount in the Midwest, where it is trapped by transportation constraints, hurting the price that Canadian exporters can get for comparable synthetic crude derived from the oil sands, the report says. While those constraints are expected to clear up as new pipelines are completed, U.S. prices generally could remain below world rates due to strong domestic supply.

That poses a problem for Canadian producers whose markets are more severely limited by a lack of pipeline routes either to Canadian tidewater or to the U.S. Gulf Coast for export. The study says the difference between North American and global crude prices could reach $3 or more per barrel over the coming years, giving oil sands producers a strong incentive to seek new markets.

Walking a fine line between framing the North American trading partners as competitors or colleagues, the study says the United States will continue to be the largest market for oil sands crude, even as tight oil outpaces the oil sands in production.

Canadian producers see exports via the Gulf Coast as the most important non-U.S. outlet for expanded markets, it says, though delays in permitting the Keystone XL pipeline make that uncertain. They are also pushing for a pipeline west through British Columbia to the Pacific, the Northern Gateway project, thought that has met with similar local resistance and delay.

In the United States, Canadian producers are looking to California's refineries, many of which are configured to handle heavy oil sands crude, according to the report, as a largely untouched market. But the state's Low Carbon Fuel Standard could derail sale contracts there if it penalizes the fuel for its higher greenhouse gas intensity.

Other countries could similarly penalize oil sands crude if Canadian greenhouse gas emissions soar as a result of production, the report notes.

"Considering the scale of growth, expected price discounts for crude oil and North America, and uncertainty around the timing of future pipelines, Canada needs options," IHS CERA concluded.

Encana CEO out

Despite the challenges ahead for the oil sands industry, companies heavily concentrated in natural gas face challenges now.

On Friday, Canadian energy company Encana Corp. announced that President and CEO Randall Eresman was stepping down after 35 years with the company.

Encana pared down its oil assets in 2009 to focus on natural gas but has suffered financially from the low gas prices that came with the production boom.

"After a highly successful 2012, Encana is once again financially and operationally very strong, and well positioned to execute on its plans to rapidly transition to a more balanced commodity portfolio," Eresman said in a statement that highlighted the company's assets in oil and natural gas liquids.

Click here to download the IHS CERA report.