* Canada's oil could back up without new pipeline infrastructure
* Natural resources minister promoting Keystone approval
By Kristen Hays
HOUSTON, March 6 (Reuters) - Canada's growing heavy crude output could turn into a glut, making the crude even cheaper than it is now, in the absence of new major pipeline capacity to move it to markets, the country's minister of natural resources said on Thursday.
"I'm definitely concerned about that," Joe Oliver told Reuters in an interview at the annual CERAWeek energy conference in Houston.
"We're looking at a potential bottleneck, certainly sometime this decade," he said. "It's looming."
Canada's support of such infrastructure fueled Oliver's appearance at the conference, which was part of a multi-day visit to the United States to press for U.S. government approval of the northern leg of TransCanada's Keystone XL pipeline after years of delays.
The pipeline needs approval from the U.S. State Department because it would cross an international border from Canada to the U.S. crude futures benchmark hub in Cushing, Oklahoma. Opponents contend it should be scrapped to ease spill concerns and possibly provide less incentive to continue the emissions-heavy operations.
A glut of inland U.S. crude at Cushing has kept U.S. crude prices cheaper than those for global crudes, though pipeline reversals and new projects are beginning to alleviate that.
Oliver said Keystone and other proposed pipeline projects can ensure refiners configured to run heavy crude can get it and keep it flowing from Canada to those markets.
"We don't want our resources to be stranded," he said.
Oliver said earlier he doesn't expect the Obama administration to reject Keystone's $5.3 billion north leg.
The State Department said in a draft report last week that the pipeline would not affect the pace of Canadian oil production. It also would not demonstrably increase greenhouse gas emissions, Oliver said.
He said 20 percent of the crude moved through Keystone would come from North Dakota's Bakken shale oil play, while the rest would come from Canada.
He noted that rejection of Keystone won't stop Canadian oil production, as some pipeline opponents hope. Demand for Canadian oil exists in India and other places in Asia, and projects are in the works to export from Eastern or Western Canada to those markets.
Those plans would go forward with or without Keystone, he said, because Canada's growing output means plenty of crude to spare.
Those projects include Canadian pipeline company's Enbridge Inc's proposed Gateway Pipeline, which would move 550,000 barrels per day of Canadian heavy oil to British Columbia for export to Asian markets. The project is under review by regulators with a decision expected by year-end.
Last month Enbridge said it was teaming up with Energy Transfer Partners to convert a natural gas pipeline to carry up to 660,000 bpd of Canadian and North Dakota Bakken crude to Louisiana from Enbridge's pipeline network in Illinois.
Enbridge Chief Executive Al Monaco told Reuters in an interview at the conference that Enbridge, like many others in the oil and gas industry, assumes the Keystone project will eventually be approved.
"There's so much product, and we need pipeline capacity," Monaco said.
Earlier Wednesday Oliver toured LyondellBasell Industries NV's 268,000 barrels-per-day refinery, which is boosting its capacity to process heavy Canadian crude oil by 115,000 bpd. The plant now runs 60,000 bpd of Canadian crude.
Many refineries along the U.S. Gulf Coast, home to 40 percent of U.S. refining capacity, support the Keystone project because they are configured to run heavy crude.
Keystone's southern leg from the U.S. crude futures benchmark hub in Cushing, Oklahoma, to the Gulf Coast is under construction.