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Re: SC20

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August 03, 2006 10:25PM
http://resourceinsights.blogspot.com/2006/08/coming-war-with-canada.html

The Coming "War" with Canada

..........Behind this looming turnabout is one very troubling development: Natural gas production in North America has leveled off. Only warm winter weather has so far delivered the continent from a severe crisis. The glib confidence with which Wall Street analysts touted the buildup in gas storage earlier this year betrays their ignorance about how tenuous those supplies really are. Underground gas storage currently stands at 2.8 trillion cubic feet (tcf) and could reach well over 3 tcf if the current hot weather abates and reduces demand for gas used to produce electricity. But those figures amount to a very small buffer when compared to the approximately 26.5 tcf consumed each year across North America. In fact, it is so small that the U. S. Federal Energy Regulatory Commission is taking steps to encourage an expansion of gas storage in order to reduce the volatility in prices.

.......But there is something else even more foreboding about the leveling off of gas production according to Douglas Reynolds, a resource economist at the University of Alaska-Fairbanks who has studied the North American gas situation closely. Reynolds predicts that North American production will begin to fall precipitously sometime after 2007. And, unlike the gradual downslope that the declining production numbers for a depleting oil well or an entire oil-producing nation trace on a graph, Reynolds expects the falloff in North American gas production to resemble a cliff. When gas wells begin to decline, they decline swiftly and often with little warning........

Which brings us back to the coming "war" with Canada. There will be no quick fixes for natural gas shortages in North America. None................

......The North American Free Trade Agreement (NAFTA) obliges Canada to share its oil and gas in the same proportion as it has in the previous 36 months prior to any restrictions placed on output........

.........But what if the Canadian government faced a situation in which its own citizens were freezing in their homes for lack of heat? Would it simply let natural gas flow south because of a trade agreement? And, what if it became apparent that the situation wasn't temporary, but rather a long-term problem?..........

.......You might expect that under the circumstances Canada and the United States would be invoking emergency conservation measures for natural gas. But instead both governments fiddle, while the continent's remaining and perilously tight natural gas supplies continue to burn. They thereby risk that one day in the not-too-distant future their relationship may turn as icy as the St. Clair River during the depths of a frigid winter......

For the US, once freindly relations with various countries that it has enjoyed in the past, will be severely tested, or fall by the wayside, as the problems with energy supplies deepen, in the years to come.
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