[This article originally appeared in the Daily Resource Hunter on November 20, 2013]
There’s a plague stretching across much of the Middle East…
In one form or another, natural gas production is falling short of expectations.
The latest example comes from Iran. “Sanctions have forced the country to curb natural gas projects such as expansion of pipelines and dashed hopes of exporting to Europe” the Wall Street Journal reports. Of note, “European Union sanctions in 2010 blocked Iran from receiving all technology used in exporting liquefied natural gas” the article concludes.
Marcellus production is higher than many countries’ total gas production – including China, Saudi Arabia and Nigeria.
But it’s not only Iran that’s grasping at straws…
We’re seeing a similar strife – albeit completely unrelated – happening in Egypt. The country’s in-border use of natural gas is sky-rocketing, likely caused by state-run subsidies, while production is failing to keep up. This in-turn takes a toll on exports…
“Egypt’s natural-gas shipments are set to drop by about half this year, undermining the military led-government’s attempts to stabilize the largest economy in North Africa.”
Add it all up and several key exporting countries in the Middle East are facing their fair share of energy worries. Turns out energy production and profits aren’t easy to come by these days! (Shucks, just ask Iran’s national gas company, which just declared bankruptcy this past weekend.)
But let’s zoom out. Travel west. Then zoom back in on America’s Northeast.
While energy woes are plaguing several Middle East nations, the U.S. is enjoying an increasing amount of abundant (and profitable) gas from an unexpected boom in the Northeast.
And, yeah, I’ll have to admit I’ve been snoozing on the natural gas action happening in the region. With natural gas prices nestled under $4, there just wasn’t much that excited me in the short-term.
But as it happens with every snooze-button soiree, the alarm finally goes off again!
Pennsylvania’s Marcellus shale formation has been coined the “Beast in the East.” And after checking out the latest production numbers, during a recent trip to Pittsburgh, I do believe the formation has earned its beastly moniker.
As I type the Marcellus shale formation is producing over 10 billion cubic feet per day (Bcfd.) For starters, that’s 57% more production than this time last year.
Here are some round numbers for you to digest:
But here’s the icing on the cake, or in this case some talons on the beast…
According to the latest version of the US Energy Information Administration’s (EIA) Drilling Production Report, 10 Bcfd may be a low estimate!
Projecting out to December of 2013, the EIA forecasts total natural gas production to be closer to 13 Bcf per day! Add that 30% boost to the stats above and you’ll see we’re talking about a SERIOUS amount of natural gas – and profitability – coming out of Pennsylvania’s Marcellus.
The beast in the east is rising!
Besides the solid uptrend that you can see on the chart above, from what I’ve heard on my recent trip to Pittsburgh, you can count on years of economic drilling and increases in production.
I’ll stop back in with some more details, soon. But in some cases I’ve heard Marcellus wells in the sweetspots are able to breakeven at natural gas prices around 40 cents.
More on that and some ways to play it…stay tuned!
Keep your boots muddy,
for The Daily Reckoning
Ed. Note: As evidenced by this and other recent articles (which you can read here and here), Matt is seriously bullish on the U.S. nat gas market. If you want to learn as much as you possibly can about this incredible story as it develops, you’re best bet is to read everything Matt has to say on the subject. Sign up for his FREE Daily Resource Hunter to stay ahead of the curve.
Original article posted on Daily Resource Hunter
The US energy boom is in full swing. Despite the naysayers, there are plenty of places to find profit opportunities in the current markets. And as Frank Holmes points out, sometimes the best energy plays can actually be found above ground. Read on...
Matt Insley is the managing editor of The Daily Resource Hunter and now the co-editor of Real Wealth Trader and Outstanding Investments. Matt is the Agora Financial in-house specialist on commodities and natural resources. He holds a degree from the University of Maryland with a double major in Business and Environmental Economics. Although always familiar with the financial markets, his main area of expertise stems from his background in the Agricultural and Natural Resources (AGNR) department. Over the past years he's stayed well ahead of the curve with forward thinking ideas in both resource stocks and hard commodities. Insley's commentary has been featured by MarketWatch.
Irans national gas company faced collapse because of sanctions not because of production issues. I suspect the same problems exist on production because of the political turmoil in the rest of the middle east. If the US can have a resurgence in gas production because of new drilling methods I also suspect it just a matter of time before the technology reaches them ALONG with a more favorable political climate.
For 73 months running, the Fed has lashed the money markets to the gross financial anomaly of zero interest rates. Never before in the history of the world has any central bank dared to hand out so much free money for so long. David Stockman has the scathing report… and how it will splatter into a world of hurt…
Dr. Ron Paul, via his Ron Paul Institute for Peace and Prosperity, has written a full-blown indictment of the Fed and their 2% inflation target. It’s below, complete with 14 lessons we’d be wise to heed. It’s lengthier than our normal feature, but well worth your time...
2014 was a hard year for commodities, but there were some surprising opportunities, for in-the-know resource investors like you. Today, our friend Frank Holmes discusses some of the winners and losers and why we saw the market take the shape that it did. But more urgently for you, he also points out an unlikely winner…
Sony's recent hacking incident with The Interview is only part of the reason I believe the cybersecurity industry is on the verge of a breakout year. Target and Home Depot also suffered embarrassing incidents recently. The demand is enormous--companies just can't ignore the dangers of data breaches any more.
Bank insolvency doesn't have to end in money printing. Using a simple, 500 year-old law, Nathan Lewis explains how to break the cycle...