I once told my readers, "North of the United States lies a treasure chest of natural resources."
Don't believe me?
The rush of investment into Canadian resources in 2007 might change your mind. On Tuesday, we talked a bit about a stream of investments moving from Alberta to Saskatchewan and how companies are looking to tap oil resources from the Bakken formation. hoping to develop the southeastern section
If we take into account both the Alberta oil sands and the emerging Bakken play in southeastern Saskatchewan, it's safe to assume Canada has a significant role to play in the future oil market. Yet despite the boom in oil and other commodities, Canada's secret crisis is their declining natural gas reserves.
The question is whether or not Canadian natural gas production can be saved.
Natural Gas Crisis
Let's quickly review the trouble Canada is having....
The Western Canadian Sedimentary basin (WCSB) makes up an overwhelming majority of Canadian natural gas production (more than 98%). The problem, however, is that production in the basin peaked roughly seven years ago. Since then, declining production has led to less natural gas being available for exports.
Canada is the world's third largest producer of natural gas, and its second largest exporter. Remember, Canadian reserves make up less than one percent of the world's total. Although Canadian production has increased over the last two decades, the amount of natural gas reserves left is in serious danger.
In other words, the U.S. has to look for other sources of natural gas. Between 2001 and 2006, U.S. natural gas imports from Canada have fallen. Back in 2001, we received 94% of our total imports from Canada. Last year, it dropped to 76%.
Shale Gas Production
Saskatchewan and Alberta were not the only Canadian provinces to draw attention in 2007. British Columbia is about to step up to the plate. It isn't oil that companies are after, but rather a massive deposit of natural gas. British Columbia is estimated to hold trillions of cubic feet of natural gas in its shales.
For those of you who have never heard of shale gas, I'll go into a little more detail. Shale gas is natural gas produced from the fractures and pore spaces of shales (no kidding, right?) Shales are the most common type of sedimentary rock in northeast British Columbia.
Like everything else in life, there's a catch...
The difficulty is making the production economical. Just like the oil sands in neighboring Alberta, the technology needs to be further developed.
Don't think for a second those complications has deterred interest. In 2007, British Columbia attracted more than a billion dollars from auctioning off oil and natural gas leases. These companies are in it for the long haul, too. Drilling projects can still take up to a decade to begin.
For investors, that gamble can pay off handsomely as producers tap the enormous gas fields. It's precisely these kind of plays that some of my other readers are profiting from. Perhaps its time to for you to join them. If you're interested, just click here.
Until next time,
Keith Kohl
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