Anadarko is Making it Big
Anirban is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the cut throat competition existing in the global economy, to be present at the right place at the right time is the name of the game. And the energy sector is no exception. With a finite amount of oil and natural gas reserve present in the world, it’s always an added advantage for the company which discovers new sources of reserves. And in a recent exploration, Anadarko (NYSE: APC) discovered a major natural gas accumulation off the Eastern Coast of the African country Mozambique.
The new discovery came in the Golfinho exploration well and is expected to hold 7 to 20-plus Tcf (trillion cubic feet) of incremental recoverable resources. Anadarko has made this discovery within the Offshore Area 1 of the Rovuma Basin where in an earlier exploration in the Prosperidade Complex the company discovered 17 to 30-plus Tcf of estimated recoverable resources. Eni (NYSE: E) has also discovered 22.5 Tcf of recoverable natural gas in the same offshore area. The current discovery is only 10 miles offshore, which provides an additional cost advantage for future development options and would also support the development of a world class liquefied natural gas (LNG) export operation in Mozambique.
While companies like Shell (NYSE: RDS-A) and Cheniere (NYSEMKT: LNG) are building LNG export plants on the western American shores to supply LNG to the Asian markets, the discoveries on the east African shore will make it possible for Anadarko to cater to these markets. Asia has become one of the hotspots for natural gas. Not only the demand for natural gas is high in this continent, the spot price for natural gas is also much higher than the price prevalent in the European and American markets. On the backdrop of the development in the emerging countries like China and India and the Fukushima Daiichi nuclear plant incident in Japan, the demand for LNG has skyrocketed in the area and is expected to increase even more in the future. Also the fact that natural gas is a greener source of energy than oil and coal has added to the demand for natural gas in these Asian countries which are trying hard to curb environmental pollution.
Given the demand for LNG in the Asian countries, the price premium available and the proximity of Mozambique to Asia, the discoveries of natural gas reserve off the Eastern Coast of Mozambique, Anadarko is strategically poised to benefit from competitive advantage over the other players. The stock is worth watching.
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