As fracking continues to develop, with new reserves being
discovered on a daily basis, the world has watched natural gas
production surge. Though still a non-renewable resource, natural
gas burns cleaner and is cheaper than crude oil. As the world looks
to replace dated energy sources, natural gas figures to be an
increasingly significant commodity. At the forefront of the NG
movement has been the US, as its presence in the natural gas world
has continued to skyrocket in recent years.
The US and Natural Gas
It has been no secret that the US is the largest consumer of a
number of fossil fuels, dwarfing the intake of other nations around
the globe. But the production of these commodities has been
steadily rising, with the US now king of the gas world. In 2011,
the country produced 62.7 billion cubic feet per day (bcfd), a
record figure. That record was shattered in 2012, when the US
showed 65.7 bcfd for the 12 month period, an increase of 4.8% from
the prior year. That figure also accounted for approximately 20% of
natural gas produced worldwide. For 2013, the US is already on pace
to show another production record.
As production has surged, prices for the commodity have been
battered, keeping something of a ceiling on NG. While this has hurt
some traders and bottom line revenues for major producers, it has
translated into lower energy bills and more money in the pocket of
the consumer. The excess in supply has also led to speculation that
the US will begin exporting NG to foreign countries as some of the
price differentials have painted a prime opportunity.
Exporting Natural Gas
"US natural gas producers have begun eyeing these markets due to
the large differential in price between US natural gas and LNG
prices in certain countries"
writes Robert Rapier
. Rapier goes on to explain that transporting NG products overseas
costs approximately $6/MMBtu. Last year saw a price difference
between the US and Japan of $14/MMBtu and $8/MMBtu for European
markets, leaving plenty of room for US producers to turn a handsome
profit. Below, we outline some of the ways investors can make a
play on US production and the prospect of exporting NG in the near
ISE-Revere Natural Gas Index Fund
(NYSEARCA:FCG): This ETF holds approximately two dozen natural
gas producers in its portfolio, with 90% of them being based in
the US. This will be a good diversified play for investors
looking to take advantage of the movement as a whole.
(NYSEMKT:LNG): After a failed investment in an NG import facility
plummeted its share price, this company received approval from
the US Department of Energy to convert to an export facility.
Since then, the stock price has recovered quite nicely with
considerable upside potential should LNG exports take off.
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Editor's note: This article by Jared Cummans was originally
): The energy giant made the move to acquire XTO Energy in 2009.
While it greatly boosted Exxon's NG production, the low prices
that soon followed hit the company hard. Should LNG exporting
take off, Exxon has the potential to recover some of the losses
the acquisition sparked and help the firm's NG segment return to