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Is Canadian Shale Gas Worth $35 Billion?

Shale gas in western Canada is at the epicenter of the energy world this week.

Excitement from energy investors over northern shale comes after Malaysian petro-major Petronas last week announced a massive investment here--$35 billion to build a liquefied natural gas (LNG) facility in the province of British Columbia. The deal is so big, it represents the largest foreign direct investment in Canada’s history.

But the promise of natural gas riches here appears to justify the spend. Gas wells drilled into shale plays like the Notikewin, Montney and Horn River in northeastern British Columbia have yielded massive discoveries—some testing at towering rates up to 24.5 million cubic feet per day, along with valuable natural gas liquids.

Tests like that are as good as any results coming out of even the hottest U.S. shale plays, such as the Marcellus.

It’s these rosy results that enticed Petronas to pay $6 billion for British Columbia-focused gas producer Progress Energy Resources in late 2012. Petronas is now making these gas fields the backbone for supply to its massive LNG development—which will ship gas across the Pacific to high-value markets in Asia and possibly beyond.

These are huge investments. But will Canada’s shales live up to their promise? After all, these plays are in their infancy. What do we really know about the economics of shale production here?

To find out, let’s take a look at some of the…

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