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Saturday, November 05, 2011

Sweet Spot for Growth.

Peak oil has been the underlying theme for investment ideas in this blog. Peak oil will certainly result in global growth coming to a halt. Current economic downturn on a world wide basis does have "Peak oil" as the underlying theme. Recent data with regards to shale gas will maybe give a window of opportunity to growth.

Shale gas resource data has been published by US Energy Information Administration. Top of the list is China and USA. USA is where the largest shale gas exploration work is done and first off the block with production. This has caused the natural gas prices in North America to be well below the world wide levels..

China and US as 2 large new energy sources.. we could be having a revival in economic growth.
India is busy importing the new energy from US for its growing economy.



Energy is the source of growth. The fact that US is producing surplus energy for export speaks of the volume of Shale gas being produced and confirms the reserves. We can expect the growth to be +ve in US. It has been said that efficiency in production ..though a good word will result in faster consumption of natural gas resources.

Conclusion: Shale gas reserves and technology to economically extract it will be a boon for world energy requirements. Subsequent efforts for exploration of  shale gas worldwide could keep the available world energy levels comfortable for the next couple of years at the least. Industries that can take advantage of cheap natural gas are set to reap profit.Current high energy prices could make some industries unprofitable. Hopefully this time (of relative stable energy prices) will be utilized for building a more energy efficient and sustainable industrial society.
References:



4 comments:

Vijay Chandrakar said...

Hi Prahalad,

I believe that Oil will become more and more expensive as time passes by. On that note, I looked into a company called Selan Exploration. I found this script pretty interesting against the backdrop of scarce oil supply. Do you track this counter. In case you do, do you mind sharing your opinion on the same. Here I am looking for a 3-5 year kind of perspective.

Regards,
Vijay

What'sUp Prahalad said...

Vijay:

Selan is an Avoid for sure..
In Annual Report 2010 they have clearly stated that the current fields are producing less due to natural ageing of the fields..

Also normal sweet crude is a thing of the past infact US strategic reserve is also no longer sweet crude..

Crude industry profitability is on decline.. in the good old days for every 1 barrel of energy spent 50 barrels of energy was discovered..

now the ratio is close to 1:5

Also the future is shale and other lower forms of crude.. look at reliance struggling to maintain its production capacity.. and they have tonnes of money but cannot find the indian fields worth investing in.


I remember reading somewhere that Castor meal has more energy than lignite ..

and more and more solvent extraction firms and companies like Jayant are using these meals for fuel.. making their production lifecycle more self sustainable..

If you are worried about energy then look at energy efficiency and the play I would recommend is "Tata Communications" .. in the future we can expect more of the travel and entertainment to be Virtual.. another place to look for is animation industry though I have no recommendations in this space.

=happy investing
whatsup-indianstockideas.blogspot.com

Vijay Chandrakar said...

Thanks Prahalad for the reply. What you say makes sense. In similar context of energy and peak oil, what is your take on City Gas distribution companies such as Indraprastha gas (IGL). I found this interesting write up on IGL.

http://www.tacticacapital.com/Site/Examples/Entries/2008/11/19_High_Quality_Business__Indraprastha_Gas_files/Indraprastha_Gas_Opportunity.pdf

Could you please share your comments on the same. Thanks

Vijay

What'sUp Prahalad said...

Vijay:

IGL is pretty expensive and there has been a sharp rise in stock price since may 2011..

GAIL the parent company is the best bet ..

What are your thoughts about BG (British Gas) moving out of Gujarat Gas and also looking for moving out of Mahanagar gas (unlisted company for city gas distribution for mumbai..)??

=happy investing
whatsup-indianstockideas.blogspot.com