"This time of year is when energy prices are at their highest."

When I heard this statement earlier today, I couldn't help shake my head. I know the gentleman was trying to make excuses for the record prices lately. But the problem is that May is usually when oil and gas prices usually fall before the summer demand picks up.

Then again, can we really expect things to be normal?

Yet it's not the rise of crude prices that held my attention today. I'm sure you've gotten used to seeing oil prices rising. I know I have. Rather, I've been fixated on natural gas. Typically, whenever we see crude prices rise, you can bet natural gas is also moving higher.

As you can see below, natural gas prices have been on a tear over the last several months...

Today, natural gas touched $11.55 mcf after heating oil supplies declined.

In the past, I've been quick to talk about the potential of Liquefied natural gas (LNG). Can you blame me, though? Imports of LNG have risen over 237% over the last five years. Now, even though LNG is able to bring natural gas to a global market, prices still aren't high enough. Remember, LNG doesn't come close to the $11.55 mcf that we're paying. It can costs upwards of $16 mcf, and can be even higher.

Toss in the massive amount of money that is needed for the LNG terminals, and it's tough to make a case for investors.

Two weeks ago, we took a look at the Marcellus gas formation in the Appalachian basin. If you recall, breakthroughs in horizontal drilling has opened the door for new deposits. Horizontal drilling has been an integral part of the success producers have experienced in the Barnett shales.

Although the Marcellus natural gas play is just starting to heat up, a huge natural gas discovery in Canada has been a hotbed of activity.

Natural Gas Boom in British Columbia

The mere mention of a Canadian energy company makes me think of Alberta. I can't help it. Last year, when I drove into Fort McMurray for the first time, the sign proudly read, "We have the Energy."

But the discovery I'm referring to isn't in the land of oil sands.

It's right next door.

I'm talking about the natural gas deposit in British Columbia. Specifically, the Horn River Basin in the northeastern part of the province. If you remember the kind of record land sales that the Bakken formation brought to Saskatchewan, British Columbia is experiencing similar success.

In 2007, British Columbia drew in about $1.05 billion from oil and gas exploration rights, as well as lands sales. To put that into perspective, Alberta brought in roughly $1.2 billion. In April, 2008, British Columbia pulled in $39.6 million in oil and gas rights.

If natural gas prices continue to rise, you can expect drilling activity in the area to go through the roof, despite the higher cost of wells.

Natural Gas Investments

Investors looking to get into the Horn River play have several options. Considering wells can cost millions of dollars per well, most of the players in the area aren't too small.

Since we're talking about shale gas, companies need to drill horizontal wells and fracture the shales to extract the natural gas. In other words, make sure the company your researching has a proven track record these drilling techniques.

Take EOG Resources (NYSE: EOG), for example, this type of drilling isn't new. EOG has been using this technique on the Barnett shales in Fort Worth for about four years. According to the company, production from the first wells should begin by June. If the company comes out with good news over the next four to six weeks, the sky is the limit in British Columbia.

Until next time,

Keith Kohl

Energy and Capital

P.S. I've been getting numerous questions from my readers on where they can invest in some of these emerging oil and natural gas plays. Frankly, I don't blame you for wanting to get a piece of the action. Most of my Energy and Capital readers have had tremendous success in the Bakken formation in the $20 Trillion Report. Now that they are on the verge of making a second round of profits, perhaps it's time to join them. Learn more about the Bakken oil play.

"Energy stocks... The only way a human is going to make any money."

-- Matt Simmons, Peak Oil's first and most vocal proponent,
and founder of the country's last pure play energy investment banking firm.

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Great short and to the point article on EOG.
Re solar power please mention to Nick that he should quickly take a look at Timmenco on the Toronto Exchange Symbol TIM. It's gone up like a rocket, and will continue.

Mike (I do not tout stocks)

The news about Bakken is thrilling and not just from point-of-view of investors. But where is the political effect? All the yakking in Congress shows no cognizance of Yakken's potential. The international effect of North American independance of imported oil should be tremendous. The "Greens" though will be infuriated by Bakken and will use every environmental regulation to stop it. That's what worries me.