UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended                 March 31, 1998
                               -----------------------------------------------

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from ________________ to ____________________

Commission file number     1-3793

                         CANADA SOUTHERN PETROLEUM LTD.
 ................................................................................
             (Exact name of registrant as specified in its charter)

      NOVA SCOTIA, CANADA                                        98-0085412
 ................................................................................
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

Suite 1410, One Palliser Square, 125 Ninth Avenue, S.E.,
      Calgary, Alberta, Canada                                    T2G OP6
 ................................................................................
   (Address of principal executive offices)                      (Zip Code)

                                  403-269-7741
 ................................................................................
              (Registrant's telephone number, including area code)


 ................................................................................
              (Former name, former address and former fiscal year,
                         if changed since last report)

         Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
l934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
                                                            |X|  Yes     |_|  No

         Indicate the number of shares  outstanding  of the issuer's  classes of
common stock as of the latest practicable date:

         Limited Voting Shares,  par value $1.00 (Canadian) per share 14,234,740
shares outstanding as of May 8, 1998.



<PAGE>




                         PART I - FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                         CANADA SOUTHERN PETROLEUM LTD.

                           CONSOLIDATED BALANCE SHEETS
                         (Expressed in Canadian dollars)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                 March 31,            December 31,
                                                                                   1998                   1997
                                                                                -----------           -----------
                                Assets

 Current assets:
<S>                                                                             <C>                   <C>        
   Cash and cash equivalents                                                    $ 1,620,945           $ 2,129,156
   Marketable securities                                                          2,121,851             3,373,334
   Accounts and interest receivable                                                 957,709             1,226,086
   Other assets                                                                     251,189               242,278
                                                                                -----------           -----------
 Total current assets                                                             4,951,694             6,970,854
                                                                                -----------           -----------

 Oil and gas properties and equipment
   (full cost method)                                                            14,343,838            13,984,771
                                                                                -----------           -----------
 Total assets                                                                   $19,295,532           $20,955,625
                                                                                ===========           ===========

                 Liabilities and Shareholders' Equity

 Current liabilities:
   Accounts payable                                                             $   354,579           $ 1,120,521
   Accrued liabilities                                                              305,933               277,715
                                                                                -----------           -----------
 Total current liabilities                                                          660,512             1,398,236
                                                                                -----------           -----------

 Future site restoration costs                                                      218,274               210,974
                                                                                -----------           -----------

 Shareholders' Equity
   Limited Voting Shares, par value $1 per share
   Authorized - 100,000,000 shares
   Outstanding -14,234,740 and 13,956,540 shares                                 14,234,740            14,234,740
   Contributed surplus                                                           26,254,139            26,254,139
                                                                                -----------           -----------
 Total capital                                                                   40,488,879            40,488,879
                                                                                -----------           -----------
   Deficit                                                                      (22,072,133)          (21,142,464)
                                                                                -----------           -----------
 Total shareholders' equity                                                      18,416,746            19,346,415
                                                                                -----------           -----------
 Total liabilities and shareholders' equity                                     $19,295,532           $20,955,625
                                                                                ===========           ===========
</TABLE>


<PAGE>


                         PART I - FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                         CANADA SOUTHERN PETROLEUM LTD.

                Consolidated Statements of Operations and Deficit
                         (Expressed in Canadian dollars)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                      Three months ended
                                                                                           March 31,

                                                                                  1998                   1997
                                                                              ------------           ------------ 
Revenues:
<S>                                                                           <C>                    <C>         
  Oil sales                                                                   $    226,579           $    294,397
  Gas sales                                                                        146,398                187,678
  Proceeds under carried interest agreements                                        56,088                    686
  Interest and other income                                                         73,649                105,137
                                                                              ------------           ------------ 
                                                                                   502,714                587,898
                                                                              ------------           ------------ 
Costs and expenses:
  General and administrative                                                       368,232                290,969
  Legal                                                                            504,088                335,772
  Lease operating costs                                                            312,924                234,889
  Depletion, depreciation, and amortization                                        182,900                128,200
  Foreign exchange loss (gain)                                                      36,652                (64,553)
  Provision for future site restoration costs                                        7,300                  5,000
  Rent                                                                              20,287                 13,675
                                                                              ------------           ------------ 
                                                                                 1,432,383                943,952
                                                                              ------------           ------------ 
  Loss before income taxes                                                        (929,669)              (356,054)
  Income taxes                                                                           -                      -
                                                                              ------------           ------------ 
Net loss                                                                          (929,669)              (356,054)

Deficit - beginning of period                                                  (21,142,464)           (19,384,800)
                                                                              ------------           ------------ 
Deficit - end of period                                                       $(22,072,133)          $(19,740,854)
                                                                              =============          =============

Average number of shares outstanding                                            14,234,740             13,956,540
                                                                                ==========             ==========

Net loss per share (Basic & Diluted)                                              $(.07)                 $(.03)
                                                                                  ======                 ======
</TABLE>



<PAGE>


                         PART I - FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                         CANADA SOUTHERN PETROLEUM LTD.

                      Consolidated Statements of Cash Flows
                         (Expressed in Canadian dollars)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                     Three months ended
                                                                                          March 31,

                                                                                 1998                   1997
                                                                              ----------             ----------
Cash flows from operating activities:                                                         
<S>                                                                           <C>                    <C>        
    Net loss                                                                  $ (929,669)            $ (356,054)
    Adjustments to reconcile net loss                                                         
    to net cash used in operating activity:                                                   
      Depreciation, depletion and amortization                                   182,900                128,200
      Future site restoration costs                                                7,300                (32,235)
    Change in current assets and liabilities:                                                 
      Accounts and interest receivable                                           268,377               (166,713)
      Prepaid insurance and other                                                 (8,911)                (8,184)
      Accounts payable                                                          (765,942)               163,530
      Accrued liabilities                                                         28,218                 37,601
                                                                              ----------             ----------
  Net cash used in operations                                                 (1,217,727)              (233,855)
                                                                              ----------             ----------
                                                                                              
Cash flows from investing activities:                                                         
  Additions to oil and gas properties (net)                                     (541,967)              (544,907)
  Sale (purchase) of marketable securities                                     1,251,483                753,334
                                                                              ----------             ----------
Net cash provided by investing activities                                        709,516                208,427
                                                                              ----------             ----------
                                                                                              
Decrease in cash and cash equivalents                                           (508,211)               (25,428)
Cash and cash equivalents at the                                                              
  beginning of period                                                          2,129,156              2,709,597
                                                                              ----------             ----------
Cash and cash equivalents at the                                                          
  end of period                                                               $1,620,945             $2,684,169
                                                                              ==========             ==========
</TABLE>



<PAGE>



                         PART I - FINANCIAL INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                                 March 31, 1998
                         (Expressed in Canadian Dollars)

Item 1.  Financial Statements - Notes

         The  information  for the three month  periods ended March 31, 1998 and
1997 is  unaudited  but includes  all  adjustments  which the Company  considers
necessary for a fair statement of the results for those periods. All adjustments
are of a normal recurring nature.

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations

         Statements   included  in  Management's   Discussion  and  Analysis  of
Financial  Condition  and  Results of  Operations  which are not  historical  in
nature,  are  intended to be, and are hereby  identified  as,  "forward  looking
statements"  for  purposes  of the "Safe  Harbor"  Statement  under the  Private
Securities  Litigation  Reform Act of 1995.  The Company  cautions  readers that
forward looking  statements are subject to certain risks and uncertainties  that
could cause  actual  results to differ  materially  from those  indicated in the
forward looking statements.

Liquidity and Capital Resources

         At March 31, 1998, the Company had  approximately  $3.7 million of cash
and securities available. Of this amount, approximately $3.3 million are held in
U.S.  Government  securities which are subject to exchange  fluctuations.  These
funds  are  expected  to be  used  for  general  corporate  purposes,  including
exploration and to continue the Kotaneelee field litigation.

         Cash flow used in  operations  during the three  months ended March 31,
1998 increased to $1,218,000  compared to $234,000  during the  comparable  1997
period.  The  difference  between  the  periods  was  caused  primarily  by  the
following:

                  Increase in loss from operations            $(479,000)
                  Changes in accounts receivable and other      434,000
                  Net change in current liabilities            (939,000)
                                                              ----------
                  Difference in net cash used in operations   $(984,000)
                                                              ==========



<PAGE>


                         PART I - FINANCIAL INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                                 March 31, 1998
                         (Expressed in Canadian Dollars)

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (continued)

         A  significant  proportion  of the  Company's  property  interests  are
covered by carried interest agreements,  which provide that expenditures made by
the operator are recouped solely out of revenues from production.  Major capital
expenditures  made by the operators  have an impact on the  Company's  cash flow
from  operations as no revenues are reported or received until the capital costs
have been  recovered by the  operator.  Properties  in the Fort Nelson,  British
Columbia  area in which the Company has carried  interests  have reached  payout
status.  Proceeds  from  these  carried  interests  plus oil and gas sales  from
working interest properties are the Company's major sources of working capital.

         The  operator of the  Kotaneelee  gas field has reported to the Company
that  development  costs  totaling  approximately  $19,109,000,   of  which  the
Company's share is $5,733,000, remain to be recovered at January 31, 1998.

         The Company is currently evaluating and expects to continue to evaluate
oil and gas properties and may make  investments  in such  properties  utilizing
cash on hand. The Company  anticipates  that its capital  expenditures  for land
acquisitions and drilling for 1998 will be approximately  $750,000. In addition,
substantial  continuing  expenses are expected to be incurred in connection with
the Kotaneelee Litigation. The expense of the Kotaneelee Litigation has been the
principal cause of the Company's losses since 1991.

Results of Operations

         Three month period ended March 31, 1998 vs. March 31, 1997

         The net loss for the quarter  ended March 31, 1998 was  $929,669  ($.07
per share)  compared  to a net loss of  $356,054  ($(.03 per share) for the 1997
period. A summary of revenue and expenses during the periods is as follows:

                                  1998               1997             Net Change
                                  ----               ----             ----------
Revenues                       $  502,714         $ 587,898           $ (85,184)
Costs and expenses             (1,432,383)         (943,952)           (488,431)
                               -----------        ----------          ----------
Net loss                       $ (929,669)        $(356,054)          $(573,615)
                               ===========        ==========          ==========



<PAGE>


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (continued)

         Oil sales  decreased 23% due to a 37% decrease in the price of oil sold
which was  partially  offset by a 31% increase in the number of units sold.  Oil
unit sales in barrels  ("bbls")  (before  deducting  royalties)  and the average
price per barrel sold during the periods indicated were as follows:

                               Three month period ended March 31,
                              1998                            1997
                  -----------------------------    -----------------------------
                         Average price                    Average price
                   bbls     per bbl     Total       bbls     per bbl     Total
Oil sales         18,194    $15.52    $282,000     13,860    $24.82    $344,000
Royalties paid                         (55,000)                         (50,000)
                                      ---------                        ---------
Total                                 $227,000                         $294,000
                                      ========                         ========

         Gas sales  decreased  22%. There was a 45% decrease in gas prices which
was partially  offset by a 27% increase in the number of units sold. The volumes
in million cubic feet  ("mmcf") and the average price of gas per thousand  cubic
feet ("mcf") sold during the periods indicated were as follows:

                                Three month period ended March 31,
                              1998                             1997
                  -----------------------------    -----------------------------
                         Average price                    Average price
                  mmcf      per mcf     Total      mmcf      per mcf     Total
Gas sales          57        $2.18    $124,000      45        $3.99    $180,000
Royalty income                          44,000                           55,000
Royalties paid                         (22,000)                         (47,000)
                                      ---------                        ---------
Total                                 $146,000                         $188,000
                                      ========                         ========
                                                       
         Proceeds under carried interest agreements  increased to $56,000 during
1998 compared to $1,000 in 1997. The operator of the Company's  carried interest
properties  had been  withholding  payment of a disputed  amount during the 1997
period.

         Interest  and  other  income  was 30%  lower in 1998.  Interest  income
decreased  35% from $97,000 in 1997 to $63,000 in the current  period due to the
decrease in funds  available  for  investment  during 1998 compared to the prior
period. In addition,  the 1998 period includes proceeds from the sale of seismic
data in the amount of $11,000 compared to $8,000 in 1997.


<PAGE>


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations (continued)

         General and administrative costs increased 27% in 1998 to $368,000 from
$291,000 in 1997.  Capital  taxes,  which are based on the  Company's net worth,
increased  $14,000 in 1998.  Directors' fees and expenses  increased  $14,000 in
1998.  Geological and engineering  expenses increased $21,000 in 1998 because of
the Company's  active  exploration  program.  Shareholders'  expenses  increased
$8,000 in 1998 compared to 1997 because of increased printing and mailing costs.
Accounting and administrative expenses increased $18,000 during 1998.

         Legal  expenses  increased  50% during  1998 to  $504,000  compared  to
$336,000  during 1997.  These expenses are related  primarily to the cost of the
Kotaneelee litigation.  During 1998, the Company continued the presentation of a
major part of its case  against the working  interest  partners.  The 1998 costs
represent both legal fees and the cost of various  Company experts who testified
or were being prepared for testimony.

         Lease  operating  costs increased 33% from $235,000 in 1997 to $313,000
in the 1998  period.  The  increase  represents  the  increased  charges  by the
operators of the Company's  properties  during the current period.  Although the
revenue on these properties also increased during the period,  the costs are not
yet  proportional  to  revenue  because  some  of the  new  wells  are  awaiting
installation of production facilities.

         Depletion,  depreciation and amortization expense increased 43% in 1998
to $183,000  from  $128,000 in 1997.  The  increase in  depletion in 1998 is the
result  of  increased  production  and the  amount  of  additional  costs  being
depleted.

         A foreign exchange loss of $37,000 was recorded in 1998,  compared with
a gain of $65,000 in 1997 on the Company's  U.S.  investments.  The value of the
Canadian  dollar was U.S. $.6992 at December 31, 1997 compared to U.S. $.7045 at
March 31, 1998.

         Income taxes. No provision for income taxes is required for the current
period.


<PAGE>



                           PART II - OTHER INFORMATION

                         CANADA SOUTHERN PETROLEUM LTD.

                                 March 31, 1998

Item 5.  Other Information

         On May 7, 1998, the Court of Queens Bench, Calgary,  Canada, denied the
Company's  motion to amend its complaint to include a claim that the  defendants
in the  Kotaneelee  field  litigation  failed to  develop  the field in a timely
manner.  The Company has filed a separate  complaint  against the  defendants to
pursue this new claim.

         On May 6, 1998,  the Company sold certain  nonproducing  properties  in
Boundary Lake, British Columbia for $200,000.

Item 6.  Exhibits and Reports on Form 8-K

         None.



<PAGE>


                                   SIGNATURES




         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                            CANADA SOUTHERN PETROLEUM LTD.
                                                     Registrant




Date:  May 12, 1998                         By /s/ Beverley A. Scobie
                                               ---------------------------------
                                               Treasurer and Chief Financial and
                                               Accounting Officer