(Adds more details from report, background)
CALGARY, Alberta, Feb 28 (Reuters) - Production, capital expenditure and remaining reserves in Canada's oil-rich province of Alberta fell in 2016, a "challenging" year with low oil prices and a wildfire that hurt the industry, according to a provincial report on Tuesday.
Conventional crude oil production fell 16 percent to 166 million barrels and bitumen production fell 3 percent to 897 million barrels, according to the Alberta Energy Regulator's (AER) annual report on reserves and supply-demand outlook.
Conventional oil and gas wells placed on production dropped 37.2 percent in 2016 from the previous year, according to the report.
Oil sands capital expenditure was down 33 percent to C$16 billion and remaining established conventional crude reserves were at 1.6 billion barrels, down from 2015's 1.8 billion barrels, the report said.
Remaining established bitumen reserves in Alberta, which produces about 80 percent of Canada's oil, were at 165 billion barrels for 2016, down 900 million barrels from the year before, it added.
Canada has the world's third-largest oil reserves, but its unconventional deposits of bitumen, a tar-like petroleum substance, are expensive to extract.
The energy sector has been hit hard by low oil prices that persisted through much of last year, and a wildfire in the oil town of Fort McMurray, Alberta, wiped out 30 million barrels in lost production, according to the report.
But the report said 2016 also brought positive news in the form of pipeline approvals by the federal government and the plan by the Organization of the Petroleum Exporting Countries to limit output to raise prices.
Bitumen production accounted for almost half of total primary energy production in 2016, and will increase to a forecasted 60 percent in 2026, the report showed.
Conventional crude, bitumen and certain natural gas liquids shipped out of the province was at 2.82 million barrels per day (bdp) in 2016 and will increase to 4.58 million bpd by 2026, according to the report.