The United States is uniquely positioned to take advantage of growing demand and subsequent rising prices for natural gas by repositioning itself firmly as an exporter of natural gas.
Natural gas is a gaseous mixture of naturally occurring hydrocarbons that consists of methane and various amounts of other higher alkanes. It is either found on its own or with petroleum, and is considered an important part in the clean energy movement due to its safety and important applications.
The price of natural gas has increased significantly over the past 12 months, reaching over US $ 5 per MCF in early September. This price jump comes after a low of US $ 1.60 MCF during the initial shock of the COVID-19 pandemic.
In this article, we’ll explain why an investment in natural gas should be on your radar, which has driven recent price increases, aggregate demand, and a few key players.
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Southern Energy (TSXV: SOU) is a Canadian, listed, predominantly natural gas company focused on the acquisition and development of conventional natural gas and light oil resources in the southeastern United States of the Gulf of Mississippi, Louisiana and East Texas Send me an investor kit
International Natural Gas Exports Affect U.S. Prices
Historically, the price of natural gas in North America has been largely determined by domestic demand factors before resorting to any method to export from the continent. In the United States in particular, natural gas is primarily used to generate electricity, residential and commercial heating, and some industrial uses.
Today, the price of natural gas is impacted by global exports to supply international markets. The United States has established significant liquefied natural gas (LNG) supply chains, allowing it to access new and larger natural gas markets in Europe and Asia, both of which have recently faced severe shortages. In addition, significant new pipeline export markets have opened up to the US Gulf Coast region of Mexico.
As a result, natural gas from the United States ââ particularly the Gulf Coast ââ is now a global product as opposed to just a North American domestic product. These new and larger markets are expected to create a long-term increase in demand for US natural gas, which should lead to even higher prices.
Demand for natural gas is expected to increase
The distribution of natural gas consumption in the United States is 15 percent for residential, 10 percent for commercial, 27 percent for industry and 38 percent for power generation.
The demand for natural gas through exports has increased due to pipeline exports which have tripled over the past decade to 76.1 billion cubic meters (BCM) and LNG exports which have increased from 1, 5 BCMs in 2010 to 61 BCMs in 2021. Pipeline exports and LNG exports combined are quickly on track to represent 10% of US natural gas consumption. Experts predict that with several new active construction projects, the US LNG export capacity will reach an impressive 20 BCF per day by the mid-2020s.
Over the past 10 years, the United States has also phased out coal-fired electricity and replaced it with natural gas. The change in natural gas resulted in a one-to-one change in Indiana and Kentucky and a 50 percent change in other states. In addition, a significant nuclear power will be permanently decommissioned over the next five to ten years in the United States. Nuclear power plants have often been replaced mainly by natural gas in the past and this is expected to continue in the years to come.
At the current rate, the projected supply gap over the next 10 to 15 years due to these changes in energy sources is unlikely to be filled by renewables. This leaves natural gas in a position to increase its market share for electricity supply in the macro bullish case for long term pricing.
Another key factor impacting demand, and ultimately the price of natural gas, is the rise of electric vehicles. For every 1% conversion of combustion engine vehicles to electric vehicles in the United States, there will be an overall increase in electricity demand of 0.7% for natural gas. This could be a game-changer for the demand for natural gas in the United States.
Key players in the natural gas industry in the United States
EQT (NYSE: EQT) is the largest producer of natural gas in the United States. The company has established operations in multiple locations in the United States, including Pennsylvania, West Virginia and Ohio, with developments in the Appalachian Basin currently underway. EQT has proven reserves of 19.8 trillion cubic feet. The company’s average daily natural gas production was 3.982 billion cubic feet in 2019.
ExxonMobil (NYSE: XOM) is the second largest producer of natural gas in the United States and one of the largest producers in the world. The company has established operations in Europe, Asia and Australia. The company’s global proven reserves total approximately 15 billion barrels of oil equivalent, of which 60 percent is petroleum and 40 percent natural gas. ExxonMobil’s average daily natural gas production was 2.778 billion cubic feet in 2019.
Southern Energy (TSXV: SOU, LSE: SOUC), which recently listed its shares on London, UK for access to global stock markets, is a company positioned to grow in the US natural gas market. The company is a well-established oil and gas producer with interests in more than 230 net producing wells in the Southeastern United States. The company delivers shareholder value by focusing on long-lived, low-decline conventional assets in areas with an abundance of infrastructure, low operating costs and raw material prices. superior quality.
The company currently owns controlling operating interests in properties spanning approximately 30,000 net acres in the Interior Mississippi Salt Basin, one of the most productive basins in the Gulf Coast region. According to the company’s most recent corporate presentation, management is targeting significant production growth of over 25,000 barrels of oil equivalent per day from primarily the U.S. Gulf Coast natural gas production over the course of the next few years.
Takeaway for investors
The United States is uniquely positioned to take advantage of growing demand and subsequent rising prices for natural gas by repositioning itself firmly as an exporter of natural gas. With Asian LNG import prices currently exceeding US $ 20 per MMBtu, the United States is expected to continue to experience record natural gas exports, something Canada has failed to capitalize on . Therefore, investors are likely to be interested in US natural gas companies like Southern Energy, which have diverse and abundant natural gas resources with significant growth potential.
This INNSpired article is sponsored by Southern Energy (TSXV: SOU, LSE: SOUC). This INNSpired article provides information sourced from the Investment News Network (INN) and endorsed by Southern Energy to help investors learn more about the company. Southern Energy is an INN customer. The Company’s Campaign Fee pays INN to create and update this INNSpired article.
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The information contained herein is for informational purposes only and should not be construed as an offer or solicitation for the sale or purchase of securities. Readers should do their own research for all publicly available information about the company. Before making any investment decisions, readers are advised to consult Southern Energy directly and seek advice from a qualified investment advisor.