US Suppliers are Leveraging Natural Gas in Global Energy Race
US Suppliers are Leveraging Natural Gas in Global Energy Race
The conflict in Ukraine and bans on Russian exports are reshaping the global energy market. It’s long overdue, and I’m not talking about simply changing oil suppliers. Natural gas, which is quickly overtaking crude as a primary fuel source, has taken center stage. It burns cleaner, is plentiful in the US, and Joe Biden just pledged 15 billion cubic tons of it to the EU.
Politics aside (as if that’s possible), the United States accounts for 5% of the world’s total natural gas reserves. In raw numbers, that’s 322 trillion cubic feet (Tcf), twelve times what we consume annually. Exporting it won’t cause American fuel prices to rise. The effect should be just the opposite. The country running the gas pump is the one that profits the most.
Energy Transfer LP Signs Distribution Deal with China’s ENN Energy
China is the world’s largest consumer of Russian crude oil. In 2021, they were importing 1.6 million barrels a day. They also buy oil from Saudi Arabia, but demand for natural gas is growing. The “green energy” transition will take decades, so LNG is a logical intermediate step. It’s not 100% clean, but air pollution from oil and coal are literally choking China out.
American companies are jumping on this. Energy Transfer LP (ET), a US natural gas supplier, entered into LNG sale and purchase agreements with China’s ENN Energy Holdings LTD (HKG:2688) just this week. ET’s stock is up 7% since the deals were signed. More importantly, it should be the catalyst needed for an FID on the Lake Charles LNG Export Hub.
The US Gulf Coast, devastated by hurricanes in recent years, will get a huge boost from this. LC LNG is just outside New Orleans, where many of the 58,000 oil workers laid off in 2020 still reside. Some are back to work. Others are struggling to feed their families. Opening the new facility to export LNG to China could get them dancing in the streets again.
As for China, the benefits there are clear. Zheng Hongtao, president of ENN, commented, “This deal provides our customers with better resources and services, ensures natural gas supply nationwide, and contributes to the low-carbon transformation of energy structure.” That’s a revealing look at China’s stance on fossil fuel consumption.
Watchlist: Iron Ore Stocks in Brazil and Australia
LNG isn’t the only natural resource to keep an eye on. Russia is also the eighth largest exporter of iron ore, shipping over 25 million metric tons of it every year (until now). Brazil, which is already responsible for 22% of global iron ore exports, ships 351 million tons, including over 16 million tons to China. Expect them to devour the Russian market share this year.
Brazilian stocks happen to be a favorite of mine because Brazil is (inexplicably) classified as an emerging market. It’s the eighth largest economy in the world. How is that not “developed?” The folks at Vale SA (VALE) certainly don’t count as “emerging.” They’re a multinational metals and mining company that’s up 43.23% YTD. That Russian customer base should be an easy acquisition for them. That’s provided the Australians don’t beat them to the party.
Australia exports 836 million metric tons of iron ore every year, the most by any nation. They also control the Chinese iron ore market, which is worth roughly $126.8 billion (Australian dollars). Their biggest metals and mining company is Rio Tinto (RIO), but BHP Group Ltd (BHP) is a stronger buy if you’re looking to invest. BHP is up 24.26% YTD.
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