The Energy War With Only One Winner

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The Energy War With Only One Winner By Keith Kohl | Friday, June 24th, 2011 “It'll never happen.” That's what my colleague, Chris DeHaemer, told me last week. In the past, we've gotten into a row or two when it came to natural gas versus coal. His latest jest came after I tried to tell him natural gas consumption would overtake coal by 2035. His laugh was skeptical enough, and soon enough I found myself in a bet that will last more than two decades – or until he concedes. I knew exactly why he was so adamant, too. A few weeks before Chris skipped town on a 31-hour flight to Mongolia, he explained why he was so bullish on coal. That morning, however, our argument became heated as each kept rejecting the other's idea. That is, until he stopped and cracked a smile. “You know who will really win out, right?” he said in a nonchalant manner. I replied without thinking twice, “Us.” Advertisement Oil for the Rest of the Century At 1.7 trillion barrels, it's 6 times bigger than the entire oil reserves of Saudi Aramco, the world's current biggest oil company. Only this oil isn't in Saudi Arabia... or anywhere near the Middle East. It's right here — within driving distance of your home. And for the first time ever, the technology is available to tap into it it. Click here to find out where your grandchildren will be getting their fuel. Energy Showdown If our argument had only stayed within U.S. borders, I'd be slightly concerned. After all, our demand for the two fuels will be a tight race over the next two decades. And even though China and India are expected to double coal imports by 2015, the IEA's latest World Energy Outlook has natural gas consumption squeaking by coal by 2035: By 2035, the world's consumption of natural gas could reach as high as 2.5 trillion cubic meters thanks to a surge in unconventional production. Last week, we talked about how the shale boom is about turn the U.S. into an LNG exporter over the next few years. Our domestic production growth has already taken its toll in lowering our natural gas imports: Unfortunately, not everyone is thrilled to see a boom in shale gas production. Advertisement Retire Healthy and Wealthy One company is the key to your long-lived and prosperous retirement. It's a small biotech that uses your own tissue to grow new organs and limbs. That's for your health. And it trades for $3.00 with the backing of some of the world's largest drug companies. That's for your wealth. Russia's Greatest Fear If anyone should be concerned about the growing activity in shale gas, it's Russia -- and with good reason, too. Things have certainly become more interesting since the last time we talked about Russia's growing fear of losing its control over energy. Why? To start with, the country will lose its edge over neighboring countries. Gazprom currently satisfies approximately two-thirds of Poland's natural gas needs. Last week, Poland's first horizontal well was completed. The well, at a depth of 13,385 feet, was drilled into the lower, organic-rich shales. The U.S. Energy Information Administration has estimated Europe holds about 618 trillion cubic feet. The largest amount of those reserves, however, is found in Poland, with 187 trillion cubic feet of recoverable gas. For Poland, energy independence from Russia can't come soon enough. If enough of Russia's gas customers suddenly find themselves free of their shackles, the loss of revenue will have a devestating effect on Russia's future energy production, which is already showing signs of distress from a lack of investment. We know Russia isn't afraid to turn off the taps if a country doesn't pay. Several years ago, a dispute between Russia and the Ukraine (they receive roughly 80% of their natural gas from Russia) ended up with the former cutting off all gas supplies moving through Ukrainian land. Now, Russia is hoping to tap into the Ukraine's shale gas fortunes, investing nearly $2 billion in a joint venture in unconventional gas projects throughout the next decade. Russia could be losing its advantage over China, too. A recent deal between China and Russia for a new gas pipeline fell apart after the two sides were unable to reach an agreement over prices. So is it really surprising to see China start developing its shale assets? China reportedly has 1,275 trillion cubic feet of recoverable shale gas resources. It's one of the reasons why their taking so much interest – and spending billions of dollars in the process – in U.S. shale projects. Our Win-Win Scenario One of the things Chris and I can agree on is that investors are in a win-win situation. We both know there's one catch to our bet: Whether or not consumption of natural gas overtakes coal within the next two decades, it's the investors that will come out on top. Within the last fifteen years, both energy sources have delivered us gains: Click to Enlarge Image Over the next 25 years, there's no reason why we can't take advantage of both natural gas and coal opportunities, especially considering global demand is heading much higher. Investors, however, have several options in front of them, and it's not just from producers. Another way to focus on those shale profits is through new techniques being used to extract the oil and gas from the rock formation. This small company, for example, has developed a process that can replace the need for hydraulic fracturing. And the best part is this new technology uses absolutely no water whatsoever. Until next time, Keith Kohl Editor: Energy and Capital P.S. For years, investors have avoided trading options for one simple reason: They don't know how to do it. In the process, they miss out on new ways to profit, even during the worst of market climates. My colleague, Ian Cooper, has broken down options trading to a science. More importantly, he's made the most novice investor understand the ins-and-outs of options. Take a few moments see how easy it can be with his latest investment report. Related Articles More Profitable than Big Oil The Biggest Coking Coal Deal Ever Offered New Ways to Top Natural Gas Profits Mongolia Hates Good News From the Archives... IEA Nations to Contribute 60 Million Barrels 2011-06-23 - Brianna Panzica GE Invests $63 Million in Small Green-Tech Companies 2011-06-23 - Brianna Panzica One More Ten-Bagger in UlaanBaatar 2011-06-23 - Christian A. DeHaemer Energy Transfer and Regency Pipeline Plan for Texas 2011-06-22 - Brianna Panzica Panels Promised by the Start of Summer 2011-06-22 - Brianna Panzica Economic Releases for the week of Monday, June 27th, 2011: Jun 27 - Personal Income and Spending Jun 28 - Case-Shiller 20-city Index Jun 29 - Pending Home Sales Jun 30 - Chicago PMI Jul 01 - Construction Spending Jul 02 - Auto and Truck Sales Jun 28 - Consumer Confidence Jul 01 - Nonfarm Private Payrolls Jul 01 - Michigan Sentiment Jul 01 - ISM Index Jun 29 - MBA Mortgage Index Brought to you by Wealth Daily

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