Iran's Loss Is Our Gain

Iran’s decision to not allow nuclear inspectors on premises has had a lot of ramifications. But nothing like what you’re about to see.

Sure, Turkey is secretly trading gold for oil and mysterious shipments of crude are showing up in less-than-official port locations in Asia. But overall, the pressure is starting to build on Ahmadinejad and his crew.

In the midst of it all there’s a strange twist of fate. At the heart of the matter the U.S. is benefiting from Iran’s boneheaded decision to keep nuclear inspectors at bay. Let’s have a look…

“At a time when sanctions are causing a slump in Iranian cargoes of liquefied petroleum gas” Bloomberg reports this week, “the U.S. is exporting more fuel than ever.”

So you see, in a roundabout way, Iran’s choice to keep inspectors at bay is actually benefiting the U.S. energy patch. Their loss is our gain!

On a broader scale, Iran sanctions are just part of the story here. The other part is the (much reiterated) fact that the U.S. is enjoying an energy boom that most other countries only dream of.

Today, this domestic oil and gas boom is having a profound effect on U.S. exports. Petroleum products like gasoline are starting to steam across the Atlantic. Likewise, so are other petroleum and gas export – importantly for today’s discussion are a class of gases called “LPGs”.

Today, I want to share two ways for you to play this next leg of America’s energy boom. In fact, as you’ll see below, a few familiar names are producing this profitable LPG export.

But first, let’s take a look at the industry…

According to the Midstream Energy Group global crude oil and gas liquids supply is 89-91 million barrels per day (bpd.) Of that, 11.8 million bpd are natural gas liquids (NGLs.)

Looking at the NGLs, 7.77 million bpd represents propane and butanes – this subsector is called liquefied petroleum gases, or LPGs for short.

In short, the LPG market is poised to boom here in the U.S.

LPGs are used all over the world. Mainly in Asia and emerging markets. And for the most part, as you’d expect, these propane/butane gases are used for cooking and transportation. In particular Asia, China and Brazil are the big players.

However, up until now – even amidst the booming market for LPGs – there wasn’t a good American-based way to play it. Today, though, the U.S. has joined the export game in a big way and several opportunities stand out. Here’s a look:

In the U.S. LPG export chart above, you’ll notice the 30-year trend around 50,000 bpd.

Starting in early 2009, though, the breakout begins. On average exports have quadrupled over the past 3 years. Current LPG exports (as of Oct. 2012) sit around 206,000 bpd.

That’s the backdrop. U.S. LPG exports are starting to boom. And with Iran sanctions, increased U.S. production and plenty of global demand there’s an opportunity here.

Luckily for us there’s a familiar name (or two) that are set to cash in.

The largest U.S. producer of NGLs (the category of gases that LPGs fall into) is DCP Midstream (DPM.) The company holds 17% (and rising) of the U.S. market share of NGL production. So as more NGLs find their way into the U.S. export mix, DCP will continue running full blast.

The other big player in this sector is Enterprise Products (EPD.) Enterprise, along with NGL production, is also an export terminal operator. This puts them right on the front edge of the U.S. export boom.

Combined, these two companies should give you exposure to this budding export boom. And while the world continues to turn, and exports out of Iran continue to drop, there could be a nice upside here.

Keep your boots muddy,

Matt Insley

Original article posted on Daily Resource Hunter