The natural gas boom is going global...
For two years, my colleague Frank Curzio and I have been showing you how to position yourself to profit off this energy megatrend. As we explained, we'll soon be exporting liquefied natural gas (LNG). We'll see thousands of trucks converted to run on natural gas. And hundreds of natural-gas-fueling stations will pop up all across the U.S.
Because of the huge new supplies of natural gas in the U.S., we've mostly been focused on the domestic opportunities. But that's changing. The same companies set to profit here are about to see a boom overseas.
Let me explain...
Two weeks ago, I flew to London to attend the annual LNG Shipping Conference. I wanted to learn the insider's "big picture" view of the natural gas market.
For two days, I got to listen to and talk with managers from the big companies that move natural gas around the world. And everyone agreed... China will be the key growth driver of the global natural gas boom.
James Leake is managing director at ICAP Shipping Research and a leading expert on the global shipping market. He's one of the people companies talk to before they make major long-term plans. And during the conference, Leake said, "China will transform the LNG market by the end of the decade."
He expects China's natural gas demand to explode over the next few years. Here's why...
China consumes huge amounts of commodities like oil, copper, and iron ore. It accounts for 46% of the global trade in coal and ore. And its oil imports already make up 13% of global trade – second only to the U.S.
But when it comes to natural gas consumption, China is just starting to catch up to developed countries. Last year, the country used 147 billion cubic meters (bcm) of natural gas – just 4% of the world's total. To put this in perspective, China consumes less natural gas than both Japan and South Korea – even though it has eight times as many people.
Based on its population, China's natural gas consumption would have to grow 700% just to catch up with its Asian neighbors.
It's already happening...
In the past two years, China's natural gas consumption jumped 37%. ICAP expects consumption to soar from 147 bcm to 400 bcm by the end of this decade – an increase of 172%. And natural gas consumption could easily top 600 bcm – more than four times current levels.
To support that kind of growth, China needs to develop its energy infrastructure, which is still way behind other developed Asian countries.
That's why shipping companies are paying close attention to China. They're hoping for a big jump in China's natural gas imports. They're already transporting billions of dollars of natural gas around the world every day. And they will do well as the next leg of this energy megatrend plays out...
A select group of "picks and shovels" stocks, including Chart Industries (NASDAQ: GTLS), is also setting its sights on China...
Chart provides products and systems for natural gas storage and transmission. Its full-year 2012 sales cracked the $1 billion mark – a new record. And the company expects to post record sales in 2013 as well.
This exceptional growth is being driven by demand from customers in China. Chart is selling millions of dollars' worth of LNG equipment to China's energy business. The latest big order came from PetroChina, the $240 billion state-owned oil giant. It awarded Chart a $40 million contract to supply a variety of LNG equipment, including storage tanks and fuel dispensers.
Chart's CEO Sam Thomas recently explained, "In North America, investments in LNG-related applications [are] at historically high levels. However, they are not accelerating at a phase many had predicted." So the company is "making up" for slower-than-expected progress in the U.S. by focusing more on China.
Since 2011, Chart's China sales have grown 50%, according to Thomas. And that growth should continue.
In sum, the latest developments paint a bullish picture for China's natural gas use. But it will take years for the country to build out its infrastructure. To maximize profits here, focus on the companies that specialize in the infrastructure China is going to need.