Domestic natural gas production in the U.S. peaked sometime in the early 70s. In order to make up for the production shortfall, the United States began importing the vital heating gas from Canada.
Now, this worked out well for a while. But in 2002, Canadian natural gas production also began to decline.
The decline continued in 2003 and 2004. Regardless of massive efforts to pull themselves out of the slump, Canadian gas producers were never able to bring themselves back up to par.
In fact, as it stands today, 80% of all wells drilled in Canada are looking for natural gas, not oil. Nevertheless, the production decline has not been reversed.
At the same time, demand for natural gas in North America has increased year after year. In the United States, 60% of all homes are heated with gas, and 70% of new homes are designed for natural gas consumption.
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Due to its clean burning qualities, natural gas is also the fuel of choice for electric power production. In 2002, 90% of all new power plants were gas-fired.
This massive demand for natural gas has put the U.S. in quite a predicament. We need more gas but don't have many places where we can recover it.
There are proven supplies of natural gas in northern Alaska and northwestern Canada. However, these supplies have no pipeline access. A pipeline to Alaska's gas is nearly 15 years away. And a Canadian pipeline is slated for completion until 2009.
Many speculators point to liquefied natural gas as a solution. But LNG brought in by ship from abroad now provides only about 1% of domestic gas. More LNG terminals are planned but are expensive and take several years to site and complete.
All this has put the U.S. up that proverbial creek without a paddle. As it stands today we can't solve the problem. But what we can do is delay the crisis.
That's where coalbed methane steps in.
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Coalbed methane is the natural gas that lies trapped in coal seams within the Earth's crust.
It's different from other resources because it is both generated and stored within the actual coalbeds themselves. The coalbeds act like a sponge and can store up to six times the amount of natural gas found in conventional reservoirs.
Coalbed methane is an attractive resource, especially for U.S. energy companies operating domestically because coal is the most abundant fuel in the United States. The U.S. also ranks number 1 in worldwide coal reserves and contains 27.13% of the world's coal.
Over the past two decades, coalbed methane production has increased steadily due to its abundance, relatively low cost of drilling at shallow depths, improved technology and the growing demand for natural gas.
As of 2000, coalbed methane accounted for 7% of the total U.S. natural gas production. Recent estimates put it as high as 9%. And experts believe that coalbed methane will account for much more as production form conventional reservoirs continues its steep decline.
There are many energy companies out there trying to exploit the coalbed methane in the United States. But few come remotely close to the potential of Torrent Energy (OTCBB:TREN).
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The latest Sproule report for the Coos Bay project, operated by Torrent's wholly owned subsidiary Methane Energy, estimated that the property contains approximately 1.2 trillion cubic feet of natural gas. That's a reserve that would impress the likes of ExxonMobil or BP.
And with only 26 million shares outstanding, the Coos Bay gas reserve equals about 46,000 cubic feet per share for investors, worth about $300 per share. And that's just at today's prices of $6.63 per Mcf! At $10 per Mcf we're looking at $460 per share!
But there's more.
The Sproule assessment assumes that the coalbeds are "wet," meaning that water would have to be produced with the gas.
But recent tests at pilot wells indicate that there is minimal or no water being produced along with the gas that is being temporarily flared, which may result in a significantly higher gas in place estimate.
So you can see the huge upside here.
The Port of Coos Bay and surrounding area, located along the Pacific coast in southwestern Oregon, is one of the largest population centers on the West Coast not currently served by natural gas.
A project to bring natural gas into the region via pipeline was completed and operational in February 2005. The local distribution company serving this market has already constructed mains in the area.
It is anticipated that this pipeline will provide a ready market for gas from the Coos Bay Basin project. The pipeline will also be connected to the Northwest Pipeline system, allowing access to the lucrative Pacific Northwest markets.
Of course there is risk associated with any exploration company. But you the opportunity for 10 for 1 return never comes without risk.
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