* 2013 oil output at 482,000 to 513,000 bpd
* Natural gas production to fall 9 pct
* Capital budget rises 7.7 pct
* Sees improving Canadian oil prices
* Shares down 2.2 pct
By Scott Haggett
CALGARY, Alberta, Dec 4 Canadian Natural Resources Ltd, the country's biggest independent petroleum producer, said on Tuesday it will boost oil production by about 9 percent next year as it looks to higher prices and strong demand for Canadian crude in the U.S. market.
The company, which operates in Canada, the North Sea and offshore West Africa, expects to spend C$6.95 billion ($7 billion) next year, 7.7 percent more than its 2012 capital budget. It's targeting oil production of between 482,000 and 513,000 barrels per day in 2013, up from a current forecast range of 452,000 to 460,000 bpd.
The increase comes despite a deep discount for Canada's heavy crude from the oil sands, which now sells for nearly $30 per barrel less than West Texas Intermediate oil, the benchmark U.S. price, because of pipeline constraints and surging supply.
But Canadian Natural is looking for higher prices for its heavy oil next year, citing expanded refining capacity in the Midwest and additional pipeline links to the refining cluster on the gulf coast.
"We are bullish on heavy oil pricing in 2013, as well as the mid and long term," Steve Laut, the company's president, said on a conference call.
Laut expects that new heavy-oil refining capacity coming on stream at BP Plc's, Whiting, Indiana, refinery and Marathon Oil Corp's Detroit refinery will add more than 300,000 bpd of additional demand for oil sands crude.
As well, an expansion of Enbridge Inc's pipeline network and the potential completion of TransCanada Corp's controversial Keystone XL pipeline will expand access to gulf refineries and drain the bloated Cushing, Oklahoma, storage hub, where high inventories have pushed the benchmark North American price to a differential of more than $20 under the Brent European standard.
"Going forward we expect that as incremental refining capacity comes on stream, Cushing becomes debottlenecked, and the (new pipelines) come on stream we'll see the volatility in heavy oil differentials significantly reduced and heavy oil differentials will tighten," Laut said.
Despite the company's bullish price forecast its shares dropped, analysts said, because investors had expected more substantial production growth.
Canadian Natural shares were down 60 Canadian cents to C$27.59 by midafternoon on the Toronto Stock Exchange.
HORIZON OUTPUT RISES
Canadian Natural expects to produce between 100,000 and 108,000 bpd of synthetic crude oil in 2013 at its Horizon oil sands project in Northern Alberta, up from an expected range of between 90,000 and 98,000 bpd this year.
The company has earmarked nearly C$2.6 billion for Horizon in its 2013 capital budget, up from about C$1.7 billion this year, as it continues a slow expansion of the project to boost production to 250,000 bpd.
Canadian Natural forecast 2013 gas output at between 1,085 billion and 1,145 billion cubic feet per day. The midpoint of the range is 9 percent below the company's 2012 guidance.
It has slowed natural gas exploration, focusing more on higher-return crude oil drilling.