The Liquid Learning Curve

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The divergence between oil and gas prices in Canada and the U.S. has reached epic proportions.

My friends and I used to joke on nights out that you feel more intelligent as the night goes on, and the drinks pour (even though the reality is probably the opposite). We used to call this the "liquid learning curve."

There's a different kind of liquid learning going on in the North American oil patch today.

The divergence between oil and gas prices in Canada and the U.S. has reached epic proportions. Currently the oil-to-gas price ratio sits around 15, up considerably from the historic average of seven.

Oil is simply a lot more valuable than gas in today's market. Focus is shifting to "wet gas" that contains a significant amount of natural gas liquids, which usually sell at prices close to the prevailing oil price. They are a significant "sweetener" for gas plays during the current period of low natural gas prices.

Plays that come with high liquids today show some of the best economics in the world.

As long as the current divergence between oil and gas prices continues, liquids-rich plays are going to be the hot topic for gas producers.

Here's to the sweet spots,

Dave Forest
[email protected]

Copyright 2009 Resource Publishers Inc.

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