Friday, January 25, 2013
The giant natural gas boom is "the single biggest game changer of the next two decades."
This week, I spoke with Dr. Kent Moors on my S&A Investor Radio podcast.
Dr. Moors is an energy expert and a consultant to the world's largest oil companies. He is also editor of the energy investment newsletter Energy Advantage. And this week, he confirmed what longtime readers already know...
America's huge new energy supplies have opened up an amazing opportunity for American companies to make "an absolute fortune internationally."
Let me explain...
The big picture will be familiar: Advances in drilling technology have fueled an awesome boom in North American natural gas production. In fact, Dr. Moors estimates the U.S. has enough recoverable, unconventional natural gas that we could increase production 25% each year into the foreseeable future.
As he explained, all that gas is about to find "a new, very profit-intensive international market."
He's talking about the market for liquefied natural gas (LNG).
Two weeks ago, I explained how shipping natural gas across the ocean requires extremely expensive, extremely complex terminals and ships. Because of these costs, we don't have an extensive transportation network for natural gas. Thus, while natural gas prices can be low in North America, which has a very large supply, they're still high in other parts of the globe.
With so much demand for the clean fuel coming from India, China, and Europe, these price gaps could fuel a huge boom in U.S. LNG exports.
Some energy analysts are skeptical of this market's potential. It will only be economical if natural gas prices remain cheap in the U.S. and expensive overseas. In short, prices of natural gas could push sharply lower once these countries use similar technologies to extract natural gas from shale.
But that isn't likely to happen anytime soon. Dr. Moors explained, "The U.S. is about eight years ahead of the rest of the world in that. In this business, eight years is like light years."
You see, it's extremely difficult to find natural gas in shale areas that have never been tapped. "Mother nature has an irritating habit of indifferently placing the hydrocarbons inside the shale. You have to [begin] several wells before you get an idea of what the return is likely to be in a given area."
The U.S. has 42 major shale basins with hundreds to thousands of wells drilled in each. Every discovery gives producers more information on where to find additional natural gas.
On the other hand, Poland is just beginning to tap its five known basins. Some foreign companies have already been involved in early drilling there. But energy giant ExxonMobil (NYSE: XOM) recently pulled out of the country after hitting several dry wells.
Huge environmental hurdles are also delaying the discovery of shale gas deposits in the international markets. New drilling technologies, like fracking, have been banned by France and Bulgaria. Other European countries may follow suit.
In other words, the price gaps should stay open for a long time.
Right now, the U.S. accounts for zero percent of the LNG export trade. But Russian energy giant Gazprom estimates that figure will drastically change over the next 10 years. By 2020, up to 12% of all the LNG traded in the world will come from the U.S. This is an amazing number – which Dr. Moors describes as a "major transformation of the global energy balance."
As I've explained before... right now, only one company has been licensed in the U.S. to build an LNG-export facility (Cheniere Energy (NYSEAMEX: LNG)). But there are at least 16 in the pipeline awaiting government approval. The government should approve several of these projects in 2013.
Sure, it will take years before America actually exports large volumes of the clean fuel. But it's going to happen... And if you're interested in making the biggest possible gains, you have to take a position soon.
Focus on the companies that specialize in building LNG terminals, pipelines, and all the rest of the infrastructure the world is going to need. Once the U.S. government approves the LNG permits, these firms will be first in line to get big contracts.
The shippers will also do well as the next leg of this energy megatrend plays out... Only a handful of companies can transport the clean fuel using vessels.
Dr. Moors is right... The U.S. exporting natural gas is one the biggest "game-changing trends" in the world. Whatever way you decide to trade it, act soon...
In the next several years, Frank says thousands of heavy-duty trucks in the U.S. could be running on natural gas... and hundreds of natural-gas-fueling stations will be popping up all across the country. "The boom is underway," he writes. "Make sure you're onboard."