Crude oil simply won’t be enough to meet the world’s long-term energy needs. But what many people don’t yet understand is that the United States can reduce its dependence on foreign oil, and perhaps eliminate it entirely, using another energy source that’s abundant right here at home.
Demand for natural gas is increasing as new technologies expand its use. In today’s video, we explore a segment of the natural gas supply chain — storage — that could offer great profit opportunities in the future. You’ll also get the name of one industry leader in this potentially very lucrative space.
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Hi, this is Kevin Kerr for Uncommon Wisdom Daily.
It’s becoming clearer every day that crude oil will not be enough to meet the world’s long-term energy needs. But what many people don’t yet understand is that the United States can reduce its dependence on foreign oil, and perhaps eliminate it entirely, using another energy source that’s abundant right here at home.
I’m talking about natural gas. It’s clean-burning, it’s efficient, and demand for it is exploding. As a result, natural gas offers enormous profit potential all along the supply chain — from drilling and exploration, to transport, to distribution and trading.
Today I want to discuss one often overlooked stop along that supply chain — storage.
Natural gas can be stored for more or less an indefinite period of time. It’s also a seasonal fuel — people use it to heat their homes in the winter. For these reasons, a vast and widespread network of storage facilities is needed.
Natural gas is often stored in underground salt caverns that are located near market centers that don’t have enough locally produced supply to meet demand. Salt caverns are ideal storage facilities because they provide an excellent seal, meaning a very low risk of leaks.
Having an ample supply of stored natural gas is insurance against any unforeseen political disruptions, accidents or natural disasters, which could affect production and delivery. And it allows for new technologies, such as natural-gas-fired electric generation. Since electricity powers air conditioners, that’s increasing demand for natural gas during the summer.
Up until 1992, natural gas was a highly regulated commodity, and storage was part of the bundled product sold by the pipelines to distribution utilities. But deregulation now allows industry participants to store gas when prices are low, and withdraw and sell it when prices are high.
Last week, I was in Amsterdam to visit storage facilities operated by Royal Vopak, the world’s largest independent tank terminal operator. It runs 83 terminals with a storage capacity of more than 27-million cubic meters in 31 countries around the world. This network of storage facilities generated revenues of 1.1 billion euros last year, and Vopak’s EBITDA more than doubled between 2005 and 2010. The company is listed on the Euronext Stock Exchange in Amsterdam.
As demand for natural gas continues to grow, storage and transport companies like Vopak will offer even better profit opportunities. It’s just one way to take advantage of a market that could someday supplant crude oil as the most important fuel in the world.
I’m Kevin Kerr for Uncommon Wisdom Daily. Thanks for watching.