Is a Natural Gas Revolution Coming Soon?
Joseph is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The Obama Administration has only approved one terminal to export natural gas so far, apparently waiting for an economic study before deciding whether or not to release more outlets for exporting the gas. The delay in deciding the fate of natural gas may soon be coming to an end, however. A study released by the government on Wednesday confirms that the exporting of natural gas would be financially beneficial to our country - enough to offset the rise in prices that exporting may pass onto those who use natural gas domestically for things such as heating.
Natural gas is far more expensive overseas, and there is demand for it - especially in Europe, where it can be three to four times as expensive than in the States. The study prepared for the Energy Department claims that exporting the gas would not cause sharp price increases, and natural gas revenues would benefit most Americans. Especially in the much-needed jobs category, where construction of natural gas terminals will provide employment a-plenty. Many projects are expected to be in the works after the release of the study (if Obama decides positively towards exportation), and a natural gas revolution could be America's next big economic boom- capable of pulling us out of our rut of slow growth.
Transportation and the Domestic Market:
Natural gas could take off domestically as well, and many companies seem to be slowly moving into the market for LNG-powered transportation. Most recently, General Dynamics (NYSE: GD) has gotten some exposure to the gas. One of the company' s subsidies, NASSCO, has secured a contract with TOTE Inc. to build two 3,100 TEU Liquid Natural Gas (LNG) powered container ships. Construction will begin in the first quarter of 2014, and the completed 764-foot long ships will be the largest in the world powered by LNG. General Dynamics NASSCO will partner with DSEC, a subsidiary of Daewoo Shipbuilding & Marine Engineering, utilizing the company's patented LNG fuel system.
Waste Management (NYSE: WM) is another company helping to pave the way for LNG transportation. The waste company has a fleet of over 1,700 LNG and compressed natural gas (CNG) powered vehicles. The company also uses decomposition of organic waste from its landfills, especially in California, to generate renewable natural gas (RNG) that can help power their fleet as well, and plans to use other landfills for this same purpose. Waste Management is also investing big in CNG infrastructure. Their investment includes new fueling stations and collection vehicles, totaling nearly $30 million in Broward County, Florida, alone.
Wal-Mart (NYSE: WMT) has also been experimenting with natural gas conversion, primarily in California. The company has been testing five LNG powered trucks over the past three years, and has plans for a new CNG-powered truck as well. The company seems to be moving slowly in adopting natural gas, however, with lack of infrastructure being one of many possible reasons.
This is where General Electric (NYSE: GE) may step in to save the day. GE has announced a collaborative measure with Clean Energy Fuels, in order to begin building "America's Natural Gas Highway." The collaboration seeks to establish a fueling network coast to coast that will enable LNG powered trucks to fuel up nation wide. This is a huge step for natural gas and its implications as an energy source. By the end of 2012, Clean Energy plans to have up to 70 LNG stations completed. The successful building of infrastructure for LNG transport will support and bolster demand and adoption of LNG, making it a realistic sustainable fuel source.
Natural gas seems to have many positives going for it. The Obama Administration, if they approve more export terminals, will allow the export of natural gas. This may be the next big economic boom in American history if everything falls into place correctly. Domestically, infrastructure to support LNG will boost adoption and conversion of LNG-powered transport vehicles, which can reduce fuel costs by more than 25% and lower emissions, according to General Electric and Clean Energy Fuels. Investing in the companies above may give an investor some exposure to the gas, but for a more direct natural gas play, Chesapeake Energy (NYSE: CHK) could also be considered.
A boom in LNG export and transportation will mean great things for Chesapeake, one of the largest producers of natural gas. Legendary investor Carl Icahn recently raised his stake in the company by almost 9% and is the second largest holder of the company's shares, behind Mason Hawkins. Hawkins and Icahn, back in June, also took control of the company's board and are more "likely to require a more disciplined approach to fundraising and spending," according to some analysts. Icahn is also influencing the company to reduce its debt and unnecessary spending, as well. If natural gas takes off, watch Chesapeake closely, because they may experience a perfect storm of rising natural gas demand, complimented by an "Icahn-Lift" to send their share price higher.
Jharry1 owns shares of General Electric Company and Wal-Mart Stores. The Motley Fool owns shares of General Dynamics, General Electric Company, and Waste Management and has the following options: long JAN 2013 $16.00 calls on Chesapeake Energy, long JAN 2014 $20.00 calls on Chesapeake Energy, long JAN 2014 $30.00 calls on Chesapeake Energy, and short JAN 2014 $15.00 puts on Chesapeake Energy. Motley Fool newsletter services recommend Waste Management. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!