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  • The Race Is On! China's Demand On U.S. Natural Gas Production.

    Over the last year I have taken a keen interest into the impending U.S. natural gas boom. My curiosity was triggered not only by news on Wall St. but also from activities in my Upstate NY hometown. Talk on the streets of fracking concerns, Gas storage facilities, and Chesapeake (NYSE:CHK) service trucks really got the rumor mill buzzing. Needless to say I began digging and researching. Aside from the information that is readily available on almost a daily basis through SA, Reuters, MSNBC, etc. etc. I did find a few facts that I felt inclined to share.....

    Taken directly from: U.S. Energy Information Administration

    China is the world's second largest oil consumer behind the United States, and the largest global energy consumer, according to the International Energy Agency (IEA). The country was a net oil exporter until the early 1990s and became the world's second largest net importer of oil in 2009. China's oil consumption growth accounted for half of the world's oil consumption growth in 2011. Natural gas usage in China has also increased rapidly in recent years, and China has looked to raise natural gas imports via pipeline and liquefied natural gas (NYSEMKT:LNG). China is also the world's largest top coal producer and consumer and accounted for about half of the global coal consumption, an important factor in world energy-related CO2 emissions. China's increasing dependence on oil imports, the need to secure and diversify energy supply, the need to develop technical expertise in unconventional resources, and attempts to capture value upstream are factors driving Chinese NOCs to invest in international projects and form strategic commercial partnerships with IOCs. China is taking advantage of the economic downturn to step up its global acquisitions and use its vast foreign exchange reserves (estimated at over $3 trillion in 2012) to help purchase equity in projects or acquire stakes in energy companies. Since 2009, the NOCs have purchased assets in the Middle East, North America, Latin America, Africa, and Asia. The NOCs invested $18 billion in overseas oil and gas assets in 2011. The NOCs increased their natural gas purchases abroad and invested $12 billion in 2011, out of a total $18 billion of oil and gas purchases, to gain more access to LNG and unconventional gas.

    The Chinese government anticipates boosting the share of natural gas as part of total energy consumption to 10 percent by 2020 to alleviate high pollution from the country's heavy coal use and diversify the fuel mix in all end-use sectors. Consumption in 2011 surged from 2009 levels by nearly 50 percent, and the country imported over 1,000 Bcf/y of liquefied natural gas (LNG) and pipeline gas to fill the gap. Although a majority share of the gas consumption is dominated by industrial users (34 percent in 2011 according to FACTS Global Energy), the recent growth of gas consumption in the past few years stems from the power, utilities, and residential sectors. EIA projects gas demand to more than triple to over 11 Tcf/y by 2035, growing about 5 percent per year. To meet this demand, China is expected to continue importing natural gas via LNG and a number of potential import pipelines from neighboring countries. It will also have to tap into its expanding domestic reserves and establish a wider natural gas network and storage capacity.

    It would certainly appear moving forward that the combined pressures of U.S. NG implementation/usage and global demand should spark the mother of all rallies. Lets just hope the U.S. isn't the last one to the game!

    Disclosure: I am long CHK.

    Mar 19 12:13 PM | Link | 2 Comments
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