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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Asia Is Going to Make Energy Investors Rich

Commodities / Energy Resources Jan 03, 2010 - 02:32 PM GMT

By: DailyWealth


Best Financial Markets Analysis ArticleMatt Badiali writes: Energy investors need to remember three things to make incredible returns in the coming decades:

Asia, Asia, and Asia.

Asia is going to make energy investors rich. Specifically, India and China will. And more specifically, they'll make folks rich in natural gas. I know you've heard the "billions of people need this and that resource" argument before, but hear me out...

From 1997 to 2007, China's total energy consumption rose from 38 quadrillion British Thermal Units (BTUs) to 76 quadrillion BTUs... roughly equal to 74 trillion cubic feet of natural gas. However, coal supplied 75% of that energy, while natural gas contributed a scant 2%.

Japan and South Korea already consume trillions of cubic feet of imported natural gas per year. India became a net importer in 2004. China became a net importer of natural gas in 2007... and that's not going to change. The country wants natural gas to supply about 7% of its energy needs by 2015. Even if China's energy consumption remained flat (and it won't), it would need to add 5 trillion cubic feet of natural gas from somewhere.

The problem is, China produced just 2.7 trillion cubic feet of gas in 2008. To add 5 trillion cubic feet of supply, the country must TRIPLE its production... or look elsewhere. But it'll face a lot of competition for natural gas in Asia.

In 2008, China, India, Japan, South Korea, and Taiwan imported a combined 5.5 trillion cubic feet of natural gas. China's natural gas imports are up 53% from 2008. India's natty imports are up 23%. Annual growth in global demand jumped from 7.5% in 2009 to a predicted 17% in 2010.

While coal and oil are still huge parts of the Asian energy picture, natural gas is becoming the "new" fuel of choice around the world.

(The demand for natural gas isn't just for energy. According to Indian hedge-fund manager Rahul Saraogi, a recent natural gas discovery in India will be used to manufacture fertilizer.)

ExxonMobil is the smartest oil company on the planet. It's also the best energy investment house on the planet. ExxonMobil's people know the facts on natural gas. They plan to supply that soaring demand. ExxonMobil is participating in several giant liquefied natural gas (LNG) projects in the Asian sphere, including the giant Gorgon project offshore Northwestern Australia.

The entire Gorgon complex contains about 40 trillion cubic feet of natural gas reserves. That's why China's interested. PetroChina agreed to buy 100 billion cubic feet per year from the project for 20 years. The estimated value of the deal is around $41 billion.

But natural gas isn't just a big boy's game. Asia needs so much gas that companies of all sizes are getting into the act. There are junior companies listed on the London Aim Exchange, the Toronto Venture Exchange, and the Australian Stock Exchange. Mid-cap energy companies are also poking around the region.

One thing every energy investor must understand: The age of natural gas is dawning around the world, even if it's still dormant here in the U.S.

We need to position ourselves to profit from that demand. At the very least, we should own shares of major oil companies like ExxonMobil, which is positioning itself to profit from Asia's voracious demand. But the sweet spot will be finding small companies in the right places.

At the S&A Resource Report, my plan is to find the most promising juniors – companies looking to discover energy supplies for China. With great teams working in far-away places, a few of those companies will make investors rich...

Good investing,


The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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