The energy world is abuzz with stories about the shale boom in the United States.
But guess what? The oil and gas riches aren’t just exclusive to our borders. Our northern neighbor Canada is also blessed with an abundance of it.
Take shale gas, for example.
The U.S. Energy Information Agency (EIA) says Canada boasts recoverable shale gas reserves of 573 trillion cubic feet (tcf) – just a shade less than the United States’ 665 tcf.
And estimates suggest that Canada may have 1,300 tcf of shale gas overall.
But Canada has other advantages over the United States, too…
~ Location: Not only does Canada have world-class shale gas resources, the country is busy shipping its reserves to the lucrative East Asian market, where energy is in high demand. Plus, it takes just eight to 10 days to ship liquefied natural gas (LNG) to the region from British Columbia.
Some forecasts say Canada may ship about 13 billion cubic feet of LNG to Asia within 10 years. That’s about how much natural gas the country currently produces! This will happen as energy companies spend an estimated $60 billion on the Canadian LNG infrastructure and export facilities in the years ahead.
~ Ethane: Canadian gas fields are also rich in liquids such as ethane, which is more profitable to tap than some fields in the United States.
~ Climate: “But it’s freezing in Canada!” you say. Well, in this case, that’s a good thing. It’s easier to process LNG in Canada’s cold climate, versus the balmy Gulf Coast.
This offers investment opportunities to investors who have overlooked Canada’s LNG market in favor of U.S. projects…
A $32-Billion Bet on Canadian Gas
Perhaps the most interesting Canadian venture is the Pacific Northwest LNG project.
It made news last year when Malaysia’s state-owned energy company, Petronas (6033.KL), bought Canada’s Progress Energy Resources for $5.1 billion. It immediately made Petronas the second-biggest stakeholder in British Columbia’s prolific Montney shale gas fields, in addition to other assets.
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And TransCanada (TRP) will build a massive new pipeline that will enable Progress Energy to ship LNG to Asia.
The pipeline is part of Petronas’ $32.5-billion investment (including the takeover) to construct the 2.4 billion cubic feet per day LNG export facility. Exports should begin in 2018.
But Petronas isn’t going it alone on this one…
The Asian Invasion
Last year, Petronas brought in Japan Petroleum Exploration (JPTXF) as a 10% partner in the project. And just last month, it enlisted state-owned Indian Oil (IOC.NS) as another 10% partner. India’s largest oil refiner has agreed to purchase 10% of the project’s future LNG output.
There could yet be another country in the mix, as Petronas is reportedly in talks with Chinese energy giant, Sinopec (SNP), over a 15% stake in the project. Sinopec has publicly stated that it plans to double the share of natural gas in its energy mix by 2020, so this would be a big step towards achieving that.
As work continues, look for Petronas to bring in even more Asian partners, all hungry for a piece of Canada’s natural gas.
Bottom line: While America’s LNG story is getting a lot of attention, it’s still in the early days. In the meantime, don’t overlook Canada’s abundant reserves when it comes to supplying Asia with much-needed LNG.
And “the chase” continues,