The nation is buzzing about natural gas these days. My colleagues across the industry are saying how natural gas will save America. And how it will finally kick our addiction to foreign oil... and transform our great nation into a major exporter.
But what I can't believe is how 95% of them have flat out got the story wrong. (It's going to cost them huge sums of money.)
This is not America's natural gas boom. Far from it. This is Planet Earth's gas boom.
To prove it... let me tell you an industry secret. Gazprom – the Russian beast that once had a lock on Europe's gas business – is in big trouble. Fracking has destroyed its business.
For years, Gazprom was an industry bully. As the world's largest supplier of natural gas (at least the conventional stuff), it raised prices and cut supplies at will. Just like those bastards in Iran, Gazprom used energy as a weapon.
But today... it can't. It's at the mercy of the free markets.
Late last week, Gazprom hit us with a bombshell announcement. It cut its prices by 10% – smack dab in the middle of one of Europe's harshest winters on record.
"Our partners asked us to revise our prices," said Alex Medvedev, Gazprom's deputy CEO, "and what we did is correct the parameters of our formula, which led to a relative price reduction of 10% on average."
Gazprom knows it can no longer use its gas as a weapon. Thanks to the same kind of unconventional gas plays we're boasting about here at home Europe no longer needs Russia. It can buy cheaper gas somewhere else.
Here's what I mean.
Just before Medvedev's announcement, Poland's treasury minister made a daring move. He spit in the face of environmental naysayers and told his country's gas drillers to get to work. He wants every company that holds a permit to explore for gas (there's over 100 of them) to frack at least 12 new wells each year.
His rationale? Poland's gas is expected to be 50% cheaper than the stuff Russia is stuffing into its pipelines.
That's bad news for Russia.
So what's Gazprom's answer? It's turned to China.
After 10 years of trying to get its foot in the door, Medvedev told reporters in New York last week that he "optimistically expects" to cut a deal with China this year.
It is not going to happen.
Russia has two problems – and if you've ever tried to sell something you know these are the two obstacles you never want to face.
First, China refuses to pay anything close to Russia's asking price. And, more damning, China just found out it may have more than enough gas of its own.
Nine days ago, China announced its plans to speed up its already furious exploration of shale gas. And just before that, Beijing made a move to list shale gas as an independent mineral resource – proving this is a brand-new and totally unexploited industry.
Why such bold moves? It's all thanks a nasty fact America's gas barons don't want you to know.
China's reserves are almost 50% greater than what we are so arrogantly proud of here in the U.S.
This chart paints the scene perfectly. In fact, print it out and hang it by your computer. That way every time somebody lies to you and says America will become a huge exporter you can point to it and say... how?
I mean, who are we going to export to?
Europe's out. It has a supply of its own.
South America is off limits. Argentina was just listed as the country with the third-largest reserves on the planet.
Africa is stuffed with gas. Can't send it there.
Australia is already exporting big quantities because it can't burn it all.
The only region not booming from unconventional gas... is Russia. And if Russia can strong-arm a few buyers, Uncle Sam doesn't stand a chance.
The bottom line is 95% of investors have got this 100% wrong. There will be no export boom. There is only way to play natural gas... and that's by looking at it as the world's cheapest fuel source.
That is exactly why the Canadian company I recommended in mid-December has soared by 54% since I recommended it.
This global boom is going to be huge. It's the biggest game changer of our lifetimes. But you've got to know all of the facts.
The fact is... America will never be a major gas exporter.
From the Inside,
Andrew Snyder is editorial director of Insiders Strategy Group.
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