Despite the nation’s long-term promise and sheer economic muscle, many American investors have almost zero exposure to our neighbors to the North. Popular international indices like the iShares MSCI EAFE Index ( EFA) simply don’t include Canada in their mix. That’s a shame, because Canada continues to feature a host of strong multinational firms across a variety of sectors.
That’s because Canada features some of the world’s largest reserves of both natural gas and crude oil. And perhaps more importantly — aside from its political stability — the land of the maple leaf is set to become one of the fastest growing oil players over the next decade or so. For those serious about adding energy exposure to their portfolios, Canada and its riches must be on your “go-to” list.
A Possible 2.5 Trillion Barrels
The shale revolution isn’t just sparking an energy renaissance here in the United States — it’s getting equally as big across the border. Featuring some of the world’s largest energy reserves, Canada continues to move forward as a global energy super power.
At the beginning of 2012, Canada contained roughly 174 billion barrels worth of proven crude oil reserves. Likewise, Canada’s proved conventional natural gas reserves amounted to nearly 61 trillion cubic feet (Tcf). Those proven reserves help rank the nation third in the world behind Saudi Arabia and Venezuela in terms of total energy availability. In fact, Canada contains more than 90% of all proven energy reserves outside of OPEC.
However, it’s on the unconventional front that Canada really begins to shine.
Like the U.S., Canada is well-endowed with an abundance of shale rock. And like the U.S., that shale features plenty of tight oil and unconventional natural gas resources — to the tune of 388 Tcf worth of technically recoverable unconventional natural gas. However, unlike the U.S., Canada features something more — namely its vast Alberta oil sands. Unique to the Canucks, the mixture of clay, oil and sand contains an estimated 2.5 trillion — yes, trillion — barrels of crude oil.
Tapping the full potential of that abundance is expensive and hinges on various logistic projects — like approving TransCanada’s (TRP) Keystone XL pipeline. But analysts at the International Energy Agency (IEA) estimate that the opportunity is just too big for Canada to ignore, and that oil sands production will surge to a staggering 5.7 million barrels per day by 2030. This jump in production will make Canada the fourth-fastest growing oil player on the planet.
Meanwhile, export plans for this oil sands crude as well as liquefied natural gas (LNG) are beginning to move beyond the planning stages and into construction. With pipelines and ports pointed toward oil thirsty Asia, Canada is preparing to be the world’s newest energy supermarket.
The opportunity just too big for investors to ignore. Here are three ways to play it: