Although Canada’s natural gas industry was officially kick-started following a discovery in New Brunswick in 1859, I believe the real beginning is firmly rooted in a place called Medicine Hat.
Never heard of it?
Don’t feel too badly. In fact, I haven’t met many people who have.
The Medicine Hat area is the site of the first gas well in Alberta, which was drilled by an unlikely candidate…
In 1883, the Canadian Pacific Railway company was drilling a simple water well when it struck natural gas more than a thousand feet underground.
The discovery led to a series of predictions that the province held a huge amount of natural gas.
Today we know that when it comes to Canadian energy production, Alberta is the undisputed king — and it’s all thanks to the province’s share of the Western Canadian Sedimentary Basin (WCSB).
I’m confident you’ve heard about the WCSB — and for good reason: There’s a staggering amount of energy tucked away there.
Home to 174 billion barrels of recoverable bitumen in the three oil sands deposits, this region also boasts the majority of Canada’s conventional petroleum reserves and contains approximately 90% of the country’s coal reserves.
Of course, it’s also the reason Canada is currently the world’s third largest producer of natural gas.
However, in spite of all this, things haven’t been going so great for Alberta’ gas industry recently…
Peak Natural Gas
Despite being one of the world’s leading natural gas producers, Canada doesn’t hold a massive amount of reserves.
Canada has about 1% of the world’s proved natural gas reserves, which stood around 187 trillion cubic meters at the end of 2012. And the country’s total gas production has been dropping steadily since peaking in 2001 — 118 years after Canadian Pacific Railway stuck gas in Medicine Hat.
In 2002, more than 187 billion cubic meters flowed out of Canadian gas wells. By last year, the country’s gas output had dropped 16.5% to 156 billion cubic meters. This decline also took place during a period in which Canada’s gas consumption rose about 10%.
As you can see below, today the country’s gas wells simply aren’t producing what they used to.
Specifically, Alberta’s gas industry is going through a rough patch.
Prior to the production peak in 2001, Alberta accounted for more than 80% of Canada’s marketable natural gas production. That year the province produced an average of about 384,700 million cubic meters every day. Last January, Alberta’s marketable gas production averaged only 263,864 million cubic meters a day, a 31% decline since 2000.
Trust me, this isn’t the time for Canada’s gas production to turn sour. If Alberta’s production woes continue, the country may have to look somewhere else if it expects to significantly ramp up LNG exports in the future…
Which is precisely what they have next door in British Columbia.
Secret Gas Stash
A week ago, I mentioned that there are a number of obstacles ahead for U.S. LNG exporters to overcome.
Yesterday morning, Energy Secretary Ernest Moniz was asked how quickly the U.S. Energy Department will move on approval for the remaining U.S. LNG projects.
His one-word reponse was, “Expeditiously.”
Despite the optimism that governmental red tape won’t suffocate potential U.S. LNG projects, I’m not convinced. It’ll be nearly impossible to ramp up LNG exports here in the States to a significant level without solving those issues.
This gives Canada the edge they need, though their problems are of a whole different nature. Fortunately, we know where Canada will find enough gas to ship LNG overseas…
You see, even though Alberta’s gas production is slipping, there’s actually one province where production is booming.
British Columbia is sitting on one of the largest shale gas resources in North America.
During the last decade alone, British Columbia’s gas production has jumped 84% to more than 100 cubic meters per day.
And last week we got a glimpse of how much recoverable shale gas the province has when the EIA released its estimates for the amount of technically recoverable shale oil and gas resources in 137 shale formations across 41 countries. In the Horn River Basin, for example, the EIA pegged the number of recoverable gas at more than 120 trillion cubic feet, spread between two formations.
Normally, companies would be dying to get their hands on that much gas… Unfortunately, it’s the Horn River Basin’s location that holds the most promise. Because it’s located so far from the U.S. natural gas market, it’s hard for producers to compete in this low-price environment.
By 2015, North American LNG exports will take center stage — and you can bet there’ll be a feverish rush to develop the unconventional gas in the Horn River Basin…
I’m putting the finishing touches on a new report that will show you exactly how capitalize on this new shale opportunity, so stay tuned…
Until next time,
Keith Kohl
Check us out on YouTube!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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