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One of the biggest investment arenas in the realm of natural gas investments right now centers around shale gas. Shale gas is the term used for a lot of natural gas that was basically once considered unrecoverable. The gas tends to be deeper in the earth and is found in the shale rock formations. It tends to be more difficult to extract. Natural gas investments in this category tend to be difficult to extract as well.
Natural Gas Investments Based On Usages
The interesting thing is that the application for natural gas may have changed, but the intention to harvest and use it on a mass scale has not. The United States may eventually, and probably will, move to natural gas to run vehicles on a mass scale, as is the case in some other countries where the technology is being rolled out. However, at present, it seems a big push is to use natural gas for power generation and for exports. Regardless of the form, natural gas investments offer a great opportunity due both to the cleaner nature of gas, and the many uses for it.
As for power generation, companies like Calpine make huge turbines that devour natural gas and spit out electricity. This is viewed as a cleaner alternative to coal. Of course, any fossil fuel will compete with more alternative energy methods such as wind, solar, geothermal, and hydro, which are seen as green and clean. Nevertheless, the massive abundance of natural gas in the United States lends itself to such application. Countries such as China and India do not necessarily have the luxury of such huge gas reservoirs to permit such. Accordingly, they lean more heavily on nuclear power.
Natural Gas Investments And Foreign LNG Consumption
On the other end of the spectrum from self-consumption in power generation, we find a move to extract, liquefy, and export natural gas. Europe is a designated customer for this LNG. Consistent with the above mention of China’s shortfall, China is also a likely mass consumer. Natural gas investments that pivot on this commerce will do well.
While China may be ramping up nuclear power plants, even after Japan, they are keenly interested in self-sufficiency on the natural gas front. And self-sufficiency is not defined as being a primary export target of America’s liquefied natural gas. The magic stems from the new technologies that will allow countries around the world to extract natural gas, as well as oil, from places the best minds in the business figured harbored irretrievable hydrocarbon goodies. The technologies will not only allow pioneering companies to get at gas previously thought stranded, but also can turn economically unfeasible deposits into something worth pursuing.
Natural Gas Investments And The New Technologies
The nice thing is that there is not just one or two ways to skin this cat. There are a multitude of different technologies, and the resourcefulness and experience of the teams applying the approaches will inevitably lead to efficient mass scale use of these methods. Some of these methods include 3D seismic mapping, carbon dioxide investing, fracturing via hydraulics, and even horizontal drilling. I find the horizontal drilling particularly interesting; as it allows neighbors to mildly encroach on one another! Should prove entertaining to watch that play out. There are any number of natural gas investments out there now in this arena, but you can be all but certain only a relative few will be stellar plays over the long term.
Natural Gas Investments And The Potential Drawbacks Of These Innovations
Some of these technologies will not be rolled out with a red carpet welcome, however. For instance, hydraulic fracturing, also known as “fracking,” can make use of not only water to break the rock, but also various chemicals. The concerns about water and other environmental pollution has given rise to opposition to drill efforts in some places. If such opposition gains traction, it can put a death grip on these natural gas investments.
For instance, the Finger Lakes area in New York is home to the Marcellus Shale, where drilling of deep wells is intended to tap the gas there. Opposition asserts that there can be the obvious soil contamination at the drill site where leaks or spills happen. The big concern, of course, is hazardous chemicals entering the ground water supplies. Moreover, when fluids are recovered from the well, there is concern about how the materials are treated and disposed of. If salt and other material is not adequately removed, fresh water sources in the area can endure heightened salinity, as has already been reported in Appalachian rivers.
On top of opposition that could stymie progress, another issue in play is the degree of scalability in shale gas projects. Some natural gas authorities question the long-term viability of shale gas recovery. Specifically, while new technologies can make extraction easier, indeed possible, from previously unrecoverable areas, it’s not yet known how broad the capability will be. Massive deposits that are geologically more friendly will be exploited. But the degree to which the techniques can gain widespread traction is not yet fully known. All that’s known at this point is that it has been questioned.
The significance of the mystery surrounding the widespread viability of new technologies relates to companies in different ways. Junior resource companies can experience insane returns when these little-known stocks have success and become market darlings. But funding could be an issue for start-ups and young companies. The companies best poised to play with shale gas technologies are the sturdy players with self-sufficient deep pockets and the ability to attract foreign money. They may not have the explosive gains of the few juniors that make it, but that should post respectable gains and be safer bets in the way of natural gas investments.
Indeed, foreign money is eager to participate, but likely to partner only with large, proven outfits. Whether or not shale gas technologies allow us to tap seemingly endless gas supplies and take the pressure off the energy crisis, there will nevertheless be money made from natural gas investments exploiting easier targets. And countries around the world have their own low-hanging fruit. China, for instance, is eager to partner with key players in the shale gas boom so as to be at the forefront of working technology. Knowledge in hand, the Chinese will be able to exploit their own shale gas deposits. This would be a huge benefit for China, which overall lacks a lot of natural gas.
Yet another major factor in the outcome of natural gas investments is the price of natural gas. A glut of gas, or at least perception thereof, has kept prices low. It’s true that there is probably a glut of natural gas at the moment. The abundance has beaten natural gas down to prices unlikely to go much lower. And the stockpiles are great, but locally some areas of the United States actually experienced disruptions in natural gas supply. Indeed, in the winter of 2010-2011, places like New Mexico went without. While parts of the United States went without gas at times during the winter of 2010-2011, prices remained at severe lows. Some gas experts had called for natural gas prices to recover notably by the end of summer 2010. But it never happened. Other key players are think recovery in gas prices could be years out still. The frugal pricing impacts the ability of smaller companies to stay in the game long enough to have notable success. But all it takes is a harsh winter to generate a new-found fondness for natural gas, supplies of which can be cut down in a hurry, making these some of the best stocks to buy now ahead of such event, through a mutual fund or outright. Plus, as noted, increased use for electricity generation alone will also create a chain reaction in price hikes over time, destined to lift natural gas investments, and so these are again good stocks to buy when beaten down so low.
