BY PAUL VIEIRA

Canadian Resources Minister Joe Oliver said that Washington's decision to deny TransCanada a permit to build the Keystone XL project underlines the need for Canada to diversify its energy exports, with particular focus on China.

At a media conference following the release of the State Department's decision, Oliver said he was "obviously disappointed" with the ruling, because he believes the project is in the interests of both Canada and the United States, in securing a stable energy supply and creating thousands of jobs.

He said he hoped Keystone XL - which proposed carrying crude from the Alberta oil sands to US Gulf coast - would eventually be approved by US authorities, as TransCanada has indicated it intends to re-apply.

However, Oliver warned that opponents of the Keystone project would now refocus efforts to try to stop the Northern Gateway pipeline, a project led by Enbridge that proposes to carry oil-sands crude to the Canadian Pacific coast, with Asia as the ultimate destination.

Prime Minister Stephen Harper is scheduled to travel to China next month.

US President Barack Obama attributed his rejection to an "arbitrary deadline" by Congressional Republicans, adding that it was not based on the merits of the pipeline.

-- Dow Jones Newswires
-- photo by M.V. Jantzen