Canada does not need offshore drilling ban -report

* Report says current safety rules working

* Warns current liability cap may be too low

* Risk low, but so too is drilling activity

VANCOUVER, Aug 18 (Reuters) - Canada has no need for a moratorium on offshore drilling in the wake of the Gulf of Mexico spill because the current risk of an accident is low, according to a Senate report released on Wednesday.

Canada’s offshore safety regulations are adequate, but the country should examine if more safeguards -- such as relief wells -- are needed, and it should update its liability cap, the Energy, Environment and Natural Resources Committee said.

“We were satisfied that the regulatory regime, both provincial and federal, is a good one,” said committee chairman David Angus. “Our committee found that Canadians should be quite comfortable with the state of play.”

The committee acknowledged that the risk of an offshore accident is low, in part, because there is no drilling under way in the Arctic or off the Pacific coast, and only one exploration well is being drilled off the Atlantic coast.

There are three projects now producing oil in the Atlantic off Newfoundland and one producing natural gas off Nova Scotia.

The deepwater exploration well being drilled off Newfoundland by Chevron Corp CVX.N was the focus of much of the committee's examination, which was begun in May because of public fears raised by the BP Plc disaster in the Gulf of Mexico.

“We found no need, or justification, or evidence to recommend that operation be stopped,” Angus told reporters in Ottawa.

The committee stressed it did not look in detail at the issue of offshore drilling in the Arctic, and said more regulatory safeguards may be needed before exploration activity is allowed in that environmentally sensitive region.

The National Energy Board, the federal oil and gas regulator, launched a review of Arctic safety and environmental drilling requirements in May.

Although no drilling is currently under way, Imperial Oil Ltd IMO.TO, Exxon Mobil Corp XOM.N and BP Plc BP.L announced in July they have formed a joint venture to explore for oil and gas in the Beaufort Sea.

Offshore operators in Canada now have a liability cap of C$30 million ($29 million) in the Atlantic and C$40 million in the Arctic for accidents in which there was no negligence involved. There is no cap involving negligence.

“As the disaster in the Gulf of Mexico demonstrates, this C$30 million figure may be woefully inadequate,” the report warned, saying it could allow operators to shift the burden of third-party financial losses onto the government.

Canada’s largest offshore spill happened in 2004 when a total of 1,000 barrels leaked from the Terra Nova production vessel off the Atlantic coast. (Reporting Allan Dowd; editing by Rob Wilson)