Canada's Gas Production Could Increase Significantly

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Includes: CNQ
by: The Value Portfolio
Summary

The world's natural gas demand is increasing.

Canada has respectable reserves and is gaining significantly more gas from its shale plays.

Canada's natural gas production is expected to increase significantly.

Introduction

Canada is the world's second largest country in the world not to far behind Russia. Recently, I wrote an article about Canada and the significant oil potential that the country has. Now, I am going to talk about Canada and the significant gas potential the country has.

Natural Gas - Fast Company

Unlike other fossil fuels, natural gas production has been increasing. As a result, different companies are searching for new alternatives for natural gas. With significant reserves, Canada has significant potential to become a more significant natural gas producer.

Natural gas is a fossil fuel formed when layers of buried plants and gases are subject to intense heat and pressure over time. Natural gas is found in deep rock formations as a result of the movement of sediment layers over time.

Current Situation

Before we can talk about Canada's future situation we must first talk about the current situation in Canada.

Top Natural Gas Producers - Mining

Here you can see the top natural gas producing countries in the world. At rank five, Canada is already a significant natural gas producer. The country is effectively tied with ranks three and four but a noticeable ways away from ranks one and two.

Canada Natural Gas Production - 321 Energy

Canada's historical natural gas production is above. As you can see, the country experienced a significant uptrend in production during the 1990s. However, in the 2000s, Canada's natural gas production has remained relatively constant with the exception of a minor downtick recently.

Natural Gas Supplied by Canada - Government Budget

Here you can also see where the natural gas from Canada goes to. As you can see here, the majority of Canada's natural gas goes to the United States.

That actually represents a positive thing. The United States uses a significant amount of fossil fuels but has recently been worried about reducing emissions.

The advantage of fossil fuels is they provide cheap fossil fuel storage. That is why people want natural gas. The United States will turn to natural gas as a cheap source of fossil fuels with minimal emissions.

Reserves

Now that we have talked some about Canada's current natural gas production, I will talk about Canada's natural gas reserves.

Canada Shale Reserves - Hydrocarbons Technology

Here you can see a map of different significant natural gas reserves. The United States and Canada both have significant and spread out natural gas reserves. More so, you can see that some of these reserves connect and spread out to the United States.

Largest Natural Gas Reserves - Energy BC

Mapping this to the rest of the world, we see the world's natural conventional natural gas reserves. In this sense, Canada's natural gas reserves are not as impressive.

The country still has 4 trillion cubic meters of natural gas. However, the other thing to pay attention to is that the United States, one of the largest natural gas producers, has reserves only twice that of the United States.

Canada currently produces roughly 170 billion cubic meters of natural gas per year. Looking at its reserves, Canada's natural gas production should last roughly twenty-four years. America's reserves should only last twelve years at its current production rate.

Natural Gas Storage Map - Hydrocarbons Technology

However, there is another important thing to pay attention to here. Above, you a map of Canada's current natural gas reserves. One significant thing to notice is that much of Canada's reserves are either offshore to the East or in the North.

Natural Gas Cost of Production - The Energy Collective

There is something important to keep in mind about arctic and offshore natural gas. Compared to other types of natural gas, these types of production tend to have a higher breakeven cost.

That higher breakeven cost means that countries are more likely to turn to other natural gas resources before they focus on Canada.

The other important thing to note is the low cost of breakeven LNG has. I have already written an article on growing LNG production. Should the LNG markets grow even more that will result in decreased demand for higher cost natural gas.

Future

So far we have talked about Canada's current situation with natural gas production along with the current extent of its reserves. One interesting thing to see above is the extent of Iran's reserves - that means it could also significantly increase its reserves.

Canada Natural Gas Production 2050 - Common Sense Canada

Looking here, we can see the significant forecast growth in Canadian Natural Gas production. There are two important things to pay attention to.

First of all, Canada's natural gas is expected to pick up significantly almost doubling from current levels. The second thing is that almost all of Canada's new gas production is expected to come from shale.

Shale Play Withdrawals - EIA

In fact, looking here, we see how quickly Canada's natural gas production has already been growing. This significant growth can be expected to continue for the future as we already saw.

World Energy Demand 2030 - Sae

I want to close out with talking about the future world energy demand up until 2030. From now until the year 2030, the world's energy demand is expected to grow at 1.7% of the next fifteen years.

This grow is expected to cause a 29% growth in natural gas demand by 2030. As countries look for new sources of natural gas production, Canada's shale production should result in significant future gas growth.

Future Carbon Emissions - Wikimedia

The last thing I want to talk about is future carbon emissions. With the exception of a major technology breakthrough (nuclear fusion), worldwide emissions are expected to continue growing significantly.

As scientists have already published, there is a significant potential harmful effect from future emissions. The world will work to avert this through lower emission methods - such as natural gas.

Invest

So far, I have talked about the current situation in Canadian natural gas along with future production and the reserves situation. Now, I will talk about how to invest in this.

Canadian Natural Resources (NYSE:CNQ) represents a solid natural gas play. The company has a relatively large $33.73 billion dollar market cap. This company also offers a respectful 2.49% dividend for holding it during the crash.

Natural Gas v. Oil Prices - LSE

The first thing to look at is the historical correlation between natural gas and oil prices. Historically, natural gas and oil prices have remained relatively similar to each other.

Because natural gas is often found where oil is, lower oil prices mean lower natural gas prices.

Historic Oil Prices - LSE

As you can see, oil prices have dropped significantly recently. The same has happened for natural gas prices.

As a result of these factors, Canadian Natural Resources has seen its share price drop from $46.23 to lows of $27.49 before a small recovery to current prices of $30.49.

This means that now represents a good opportunity to invest and get involved in the long-term Candian growth.

Conclusion

Natural gas is playing an integral and growing part of the world. Natural gas production is expected to grow over the coming decades. The main reason for this is that natural gas production has moderate emissions but offers significant energy.

Canada has significant natural gas reserves. These reserves along with the gas will result in significant natural gas growth. Canada's conventional gas is expected to decrease but the country's shale gas production will cause significant growth.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.