Canada's Black Gold Rush

Keith Kohl

Written By Keith Kohl

Posted August 15, 2012

Here at Energy and Capital, we’ve always had a soft spot for emerging oil plays.

These plays are the first to catch my eye as they pop up across North America.

The latest one is unfolding in an unexpected place.

Granted, the farthest north I’ve traveled is only a few kilometers past Fort Nelson. I’m starting to get the feeling I didn’t go far enough…

It turns out the Northwest Territories have a sizable shale play of their own: the Canol Shale Formation.

According to some reports, there’s as much as three billion barrels of recoverable oil just waiting to be pumped out of the ground.

Wait… Where?

Though we normally think of Alberta as Canada’s energy powerhouse, the province has been losing ground for years…

Since 2001, Alberta’s marketable natural gas production has declined by nearly 30%, while British Columbia’s gas production increased approximately 66% during the same period. And don’t forget to factor in the steady slide in Alberta’s conventional oil production during the last decade.

The Canol Formation, located in Canada’s Northwest Territories, is the newest player on the scene.

We can expect the buzz surrounding this shale formation to heat up over the next 12 months as large oil companies like Husky and Shell begin pushing their drill bits into the ground there, which is bound to happen with three billion barrels of recoverable oil at stake.

But have you spotted the huge catch in all of this?

It’s the same problem Bakken producers are having — something we’ve mentioned countless times here in the pages of Energy and Capital.

We’re talking about more than just laying down a few more oil pipelines…

If you’re wondering why I’ve never made it past British Columbia on my sojourns, it’s because I’d need more than my Chevy to make the trek. The few roads that stretch across the Northwest Territories aren’t your typical highways.

ice road

The companies producing in this region have two options to get their rigs and equipment on site: either truck it across the few ice roads during the winter, or send it by ship when it’s too warm to travel on the ice.

The severe lack of infrastructure is what’s keeping the Canol Shale play from truly taking off.

Luckily, there are much bigger opportunities opening up for us…

By now, we’re painfully aware of how the United States has taken Canadian energy for granted.

I can’t really blame anyone for doing so. Because until now, Canada has really had only one outlet: us.

It’s far cheaper to pipe their crude oil south into the lower 48 states than to ship it halfway around the world…

And considering our gluttonous need for crude nowadays — currently sitting just below 19 million barrels of petroleum products per day — we are happy to take it off their hands.

As far as natural gas is concerned, we’ve always assumed too much. This is due to the simple fact that natural gas is mostly a regional market, because the most efficient way for companies to bring natural gas supplies to market is via pipeline.

Soon, however, the U.S. won’t be Canada’s only customer.

Consider the billions of dollars has China spent helping to develop Canada’s energy sector. The two latest deals worth $16 billion are still fresh in our minds.

Trust me; it’s no coincidence that China’s richest man has billions invested in Husky Energy, one of Canada’s largest integrated energy companies.

Husky just so happens to be drilling two vertical wells into the Canol this winter.

What’s more, China has been securing future energy supplies across the globe…

Nothing is out of bounds for the Chinese, including one of the largest natural gas deposits in North America — which alone is worth a fortune in the Asian market.

You can learn the details of that $2 trillion Sino-Canadian gas pact for yourself right here.

Until next time,

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Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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