May 9 (Reuters) - As Canada's oil industry celebrates

the start of the Trans Mountain pipeline expansion (TMX), some

company executives and analysts are already warning that

long-term production growth plans will depend on new takeaway

capacity becoming available.

TMX, which started commercial operations last week after

years of delays, will ship an extra 590,0000 barrels per day

(bpd) of oil from Alberta to the Pacific Coast. Committed

shippers have reserved space on 80% of the pipeline, leaving 20%

available to spot shipments.

The expansion provides Canada, the world's fourth-largest

oil producer, with ample pipeline space for the first time in

over a decade and has helped lift benchmark heavy oil prices.

Canada produced 4.9 million bpd of oil in 2023, of which a

record 4.5 million bpd came from Alberta. Thanks to TMX the

industry now has nearly 5.3 million bpd of pipeline capacity,

according to Canada Energy Regulator.

But producers are forging ahead with oil output expansion

plans that will rapidly fill the unused space.

"TMX is the single largest capacity addition in one shot in

over a decade but it looks unlikely to solve the egress issue on

its own," said Kevin Birn, chief analyst of Canadian oil markets

at S&P Global Commodity Insights.

"There's so much potential (in Canada) but all the basic

fundamental realities of the market have not changed."

Canadian producers could add 300,000-500,000 bpd of oil in

2024 alone, making Canada one of the world's largest sources of

supply growth, according to TD Securities estimates.

Many analysts expect this will be the last oil pipeline ever

built in Canada. Regulatory hurdles and environmental

opposition, they say, will hinder some of the more ambitious

growth proposals outlined by companies including Canadian

Natural Resources Ltd ( CNQ ) and the Alberta government.

WORLD'S THIRD-LARGEST RESERVES

Canada's oil reserves are enormous: the third-largest in the

world, mostly comprised of vast bitumen deposits strewn beneath

the boreal forest and peat bogs of northern Alberta.

This year Alberta premier Danielle Smith said she wants to

double the province's oil and gas production.

But unlike top U.S. shale-producing regions where pipeline

firms overbuilt capacity, growth in Alberta has long been

limited by how much oil can move out of the landlocked province.

On earnings calls over the past two weeks, some producers

including Suncor Energy ( SU ) and Imperial Oil ( IMO )

reported new oil sands production records. Firms also outlined

plans to boost output further through measures such as adding

new well pads at existing thermal projects and optimizing

operations at mine sites.

TMX's start-up will enable Alberta and Suncor production

growth and reduce the discount on Canadian crude, said Dave

Oldreive, Suncor's executive vice president of downstream, on a

Wednesday earnings call.

Canadian Natural, the country's largest oil and gas firm

with 1.3 million barrels of oil equivalent per day (boepd) of

output, last week said it is considering a 195,000 bpd expansion

of bitumen production at its Horizon oil sands mine. Horizon

currently has capacity to produce about 255,000 bpd of synthetic

crude oil, upgraded from bitumen.

But Canadian Natural President Scott Stauth said that would

hinge on new pipeline export capacity and government financial

support for reducing carbon emissions.

"That fiscal policy is absolutely key for us to be able to

move any additional expansion volumes forward," Stauth said on

an earnings call last week. "Also important in terms of that

would be securing and working on enhancing egress capacity."

Rival Cenovus Energy ( CVE ) is planning to grow production

by 150,000 bpd, or 19%, over the next three to four years.

CEO Jon McKenzie welcomed TMX and its positive impact on

crude prices, but said Canada's spare pipeline capacity would

likely disappear within five years.

"As an industry, we have a history of filling up excess

egress, and I think that will happen through time," McKenzie

said on an earnings call.