OJO Zafado

Now, Shortages of Natural Gas

LNG is by definition a world market. The North American gas market so far has operated independent of it. LNG faces hurdles based on NIMBY opposition to even the off shore submerged turret bouy terminals used by regassification ships as operated by Excelerant. Add to that a history of when the US first started importing Nat Gas from Algeria in the '70s, where as soon as the infrastructure was put in place to import the gas the Algerians voided the long term price contract. El Paso took a bath on the project. LNG is subject to world political disruptions. We have seen the problems in Eastern and western Europe with the price escalating due to the Russian supply being heavily "taxed" and steady hikes in what Russia chooses to charge. We in the North American market are still getting "cheap" gas from Canada. Export, provincial, and future taxes are all expected to rise on Canadian gas. Canada supplies us with 15% of our natural gas , huge amounts of which have recently been diverted to oil sands mining projects. Oil above $80/BBL make this oil recovery profitable. As these projects continue to become even more developed the US N/G market will feel the pinch. Ultimately the weaning away from oil and the number of LNG bottoms in the world tanker fleet will lead to the full globalization of the Nat Gas market. It is seldom reported or appreciated that the worlds largest nuclear power plant to have a serious accident was not TM Island or Chernoble. The Kazawasaki plant in Japan was damaged by an earthquake and leaked radioactive materials into the Sea of Japan. This has made Japan re-examine it's nuclear power industry and increase imports of gas. They are now competing with China and Korea for those cargoes. China just had an earthquake. Now we see Indonesia a major source of exported gas leaving OPEC and with 235 million in pop becoming a net importer of oil. It would seem that they might soon begin curbing exports of gas by imposing stiff export taxes. Ours will be a Winter of discontent , hardly made sunny and warm by the next leader of "The Free Money World". I agree with the author that the price in N/A is headed higher. "unless changes are made", does not ring true. It is all about supply and demand. When demand exceeds N/A production then the idle gas terminals will begin recieving more loads. It would seem there actually are enough of these terminals in place ready to operate as of now. More terminals may indeed be needed in the future. They may more likely be built in Mexico, British Columbia or the Atlantic Provinces of Canada. There is a project being engineered to run an under sea pipline from the Bahamas to Florida. The LNG would of course arrive in the Bahamas and be regassified. While the political situation in Venezuela will result in most of their off shore gas remaining untapped, a considerable amount of exploration and increase in production is expected from Trinidad. The US still gets very little gas from Mexico. They are likely to become a more significant supplier as well. I own a portfolio of NG funds and stocks that have all been performing well. FSNGX,UMESX,EP-PrC, SNG,PGH,HTE,AAV,PWE, PVX & IEO. Rather than own UNG or FCG I am thinking of taking a position KYE. I recently sold my position in ENY but will consider buying it again if it comes back to earth.