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Feature
Article - State of
Natural Gas Industry in the USA
"We're out of
gas" is what Chairman of the Federal Reserve Alan Greenspan said and he wasn’t talking about the economy. Greenspan appeared before the senate committee earlier this year and talked about the nation's looming natural gas shortage.
"Today's tight natural gas markets have been a long time in coming,"
"and distant futures prices suggest that we are not apt to return to earlier periods of relative abundance and low prices anytime soon."
In his testimony, Greenspan pointed out that the market - the best
of our admittedly imperfect future predictors - is indicating high
and rising methane prices throughout the decade. "The long-term equilibrium price for natural gas in the United States has risen
persistently during the past six years from approximately $2 per
million Btu to more than $4.50. Although futures markets project a
near-term modest price decline from current highly elevated levels,
contracts written for delivery in 2009 are more than double the levels that had been contemplated when much of our existing gas-using capital stock was put in place."
Because the United States imports 53% of its crude oil (compared to
35% during the oil embargo of 1973), the country relies increasingly
on natural gas to supply its energy needs.
Natural gas will play an increasingly important role in satisfying
U.S. energy need
Quote from Time Magazine (July 21st 2003): "Crude oil is winding down. The last nuclear power plant was ordered in July 1973. No meaningful alternative fuels exist. In short, Americans are heading toward their first major energy crunch since the 1970s."
History
Back in the early 60’s natural gas was considered a nuisance, not a collectable resource. Back then, gas was the ugly stepchild of the petroleum family - a safety hazard with no market value. Drillers cursed when they found it and North
American gas sold for 30¢ per thousand cubic feet as recently as 1974.
With fewer oil wells being discovered and energy demand increasing companies eventually began to consider the
applications for natural gas. In short order, excess methane gas (natural gas) was not only being captured, but
companies began to drill for it, routing production directly from the well into pipelines.
Today
Natural gas is delivered to about 175 million American consumers through a 1.3 million-mile network of underground pipe.
There are nearly half a million wells in North America producing
natural gas.
Natural gas supply is not disrupted by wars or embargoes. While the United States imports half of its oil supplies, a whopping 88 percent of the natural gas it consumes is produced domestically, while the remaining balance is imported from Canada via pipeline.
The Problem
Many natural gas wells in the United States are beginning to run dry. The Oil & Gas Journal a few years back published a wake-up article, explaining how Texas - which produces one-third of the nation's gas - must drill 6,400 new wells each year to keep its production from plummeting. That's a rate of 17 new wells every day. By comparison, a few years before, Texas was drilling just 4,000 wells to keep production steady. Drillers are drilling smaller pools, which deplete much more quickly.
The Solution
- The solution is simple
1) Drill for more wells in the US.
2) Import more gas from Canada. Western Canada has an attractive oil and gas basin in over 200 Tcf of gas reserves, making it the largest basin in North America. Only 25 percent of estimated reserves have been exploited in Canada, compared with 45 percent in the continental United States.
The Future Winners in the Natural Gas Game
The big winner will be Canadian integrated gas producers such as Petro-Canada (PCZ) & and Natural Gas players in the US that are prepared to drill for a network of smaller wells such as Litewave Corporation (LTWV.OB).
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Investment
opportunity in natural gas: Below is profile
information on Natural Gas Companies mentioned in the featured
article as having significant growth opportunity
LTWV
- A natural gas stock positioned to go on an uptrend; Litewave
Corporation is announcing a new well on the average of once
every two weeks. LTWV is typical of many smaller natural
gas start-ups that dot the the US gas basin. These niche players
are skilled in finding gas and are able to provide significant
payoff to investors when they attain critical cumulative volume to support a
network.
Investors will like the rapid growth of Litewave
Corporation and should see a good size pop when the company announces to connect the wells via pipeline. Cost of pipeline is
minimal as it is close to the main pipeline and will generate
10s of thousands of dollars a month.
LTWV trades on OTC BB. Research Link: Quote
PCZ -
Petro-Canada is an integrated oil and gas company with a portfolio of businesses spanning both the Upstream and Downstream of the industry. In the Upstream, the Company explores for, develops, produces and markets crude oil and natural gas. The Company's Downstream business refines crude oil and other feedstocks, and markets and distributes petroleum products and related goods and services. Petro-Canada operates in three business segments: Upstream Canada (which includes three of its core businesses: North American Natural Gas, Oil Sands and East Coast Oil), Upstream International and Downstream.
PCZ trades on NYSE. Research Link: Quote
The
Natural Gas Publication is an independent publication produced by
an alliance of natural gas interests for the purpose of general information.
Newsletter Disclaimer: The information contained herein is believed to be accurate but this cannot be guaranteed. The analysis does not purport to be a complete study of securities mentioned herein, and readers are advised to discuss any related purchase or sale decisions with a registered securities broker. Companies featured herein may be at very early stages of development and can therefore be subject to business failure, and are to be considered speculative and high risk in nature. Reports herein are for information purposes and are not solicitations to buy or sell any of the securities mentioned. The author may or may not hold a position (long or short) in the securities mentioned herein. The author is not a registered securities advisor, and opinions expressed should not be considered as investment advice to buy or sell securities, but rather opinion only.
No fees were collected for the research or preparation of this
publication.
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