The Shale Gas Revolution

Just a few years ago, the energy investment idea du jour was to build liquefied natural gas (LNG) terminals to handle future imports to the voracious US hydrocarbon market. Remember Cheniere Energy, once the darling of newsletter writers? Now there’s talk of re-tooling some of America’s LNG systems for the exportation of natural gas. Instead of bringing foreign gas to our shores, the newest idea is to liquefy natural gas in North America and export it to Europe and China. In terms of gas, the world has turned upside down.

The world energy landscape has changed with new developments in extracting natural gas from shale beds and tight sands. Innovative extraction technologies have dramatically altered the economics of natural gas extraction in North America. South Africa’s Sasol Corp., for example, is teaming up with Talisman (NYSE:TLM) to turn otherwise stranded gas into liquid fuel in northern British Columbia. It’s a truly revolutionary process – a point that The New York Times made a few days after I mentioned this joint-venture to the subscribers of Outstanding Investments.

Companies like Consol Energy (NYSE:CNX) and MarkWest Energy (NYSE:MWE) are also benefitting from US, Canadian and now global shale gas development. Even our friends the Chinese are coming to the US, to learn how we’re cracking shale for gas, so they can duplicate the effort back in the Motherland.

At the same time, the technology for freeing shale gas is finding its way into the oil patch, with companies like Venoco (NYSE:VQ) working to turn California’s Monterey Shale into a vast new oil resource. There are a lot of hydrocarbon molecules out there. The trick is to harvest them.

Forward-looking investors should not ignore the fact that shale gas development will provide enormous opportunities for the oil service guys, particularly Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI).

There’s much more to come with the shale gas revolution. We’re just in the early innings on this one. There’s plenty of good investing ahead, and a lot of hydrocarbon molecules yet to be sucked out of the crust.

Source: Byron King