Hi ,
When Russia turned the nat gas taps off, things got ugly.
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- Europeans saw their energy bills go from €250/month to more than €2,500/month.
- Energy costs skyr ocketed from under €100 / MWh to +€1,000 / MWh in some EU countrie s.
- Liquid Natural Ga s (LNG) import prices shot up from €7 in 2021 to €70.
Corporations, individua ls, and utilities felt the pain.
To ensure that there w ould be enough natural gas to keep the lights on, many fertilizer companies w ere forced to cut production by 50%. The effect on crop yields are still to be seen.
Then, there was relief.
It's better to be lucky than smart… Europe got lucky, and had the second mildest winter on record - which brought energy prices down to pre-invasion levels.
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A blessing for European energy bills and an opportunity for savvy investors .
This wasn't a stay of execution… just a delay. However, it has given the West more time to come up with solutions - one of which is U.S. LNG imports.
The Freeport LNG terminal, which was shut down due to a fire and explosion in June of 2022, is ready to come back online. This will be a major source of LNG exports heading to Europe.
Added EU demand will put price pressure on U.S. natural gas.
There is a high probability that a significant price move could occur in the North American natural gas markets over the next 12 months.
Last summer we saw U.S. natural gas prices break $7.00 / mcf for the first time in 14 years.
State of the (natural gas) Union.
We have been convinced that U.S. oil and gas production growth would stall and eventually turn negative, delivering a major hit to US energy supply. This thesis has been largely driven by the research of our friend Scott Lapierre - a world class petrophysicist that we had on the Ri Podcast 3 years ago.
So far, things are playing out as we expected.
Peak Oil
Today many analysts refer to peak oil demand, but originally peak oil referred to supply.
The idea of a basin's peak oil supply is associated with a controversial Royal Dutch Shell geologist from the 1950s named M. King Hubbert. He believed that an oil or gas field's production resembles a bell-shaped curve. | | | |
Hubbert expected a field's production to increase at an accelerating rate, level off / plateau, and then decline at a rate similar to its growth phase.
In 1956 he predic ted that U.S. crude oil production would peak in the 1970s at around 10 mm b/d. In 1970 when U.S. production did peak at 10 mm b/d, his work gained w idespread attention.
From 1970 until 2 008 U.S. oil production declined, until a new type of basin came into the lim elight…
U.S. Shale Oil & Gas
When hydraulic f racturing (aka: fracking) came on the scene, shale oil and gas became huge . In return, the U.S. became the largest producer of oil and gas in the world.
But, we believe the theory of a bell shaped production c urve still holds true for fracked wells, just like it did for conventional oil and gas.
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If we're right… We're ru nning out of O&G.
Our own controversial g eologist, Scott Lapierre, has been pounding the table warning investors of de clining shale production.
Scott came to this conc lusion independently of Hubbert's ideas. Scott's ideas arose from first princip le calculations using the physical properties of oil, gas, and the rocks that trap it.
If both Scott's science and Hubbert's theories are correct, it could mean U.S. oil and gas production could fall as fast as it rose since the onset of fracking.
The proof is in th e pudding.
The two earliest shale basins, the Barnett and Fayetteville, saw peak production between 20 11 and 2014. Since, they have each declined by 70%.
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Both of th ese early shale basins were gas fields.
What d oes this mean?
The days of cheap natural gas in the U.S. are over.
The next largest natural gas fields are the Marcellus and the Haynesville.
The Marc ellus is following Hubbert's bell curve model, having reached its plateau i n 2020. Over the last twelve months, the Marcellus declined by 300 mcf/d. H ubbert models suggest that the Haynesville could plateau as soon as next year .
Explora tion is dead.
Natural g as drilling in the U.S. is near all-time lows.
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The n umber of active natural gas rigs in the United States has declined by more than 75% since 2014, resulting in U.S. gas production declining by more than 10% in the same period.
Beca use of low energy prices, and a move towards clean energy, the appetite for h ydrocarbon exploration has been dead.
This l eaves the U.S. in a precarious position… And natural gas prices are vulne rable to a surge.
We'v e been watching the U.S. energy sector for 3-years, searching for the right deals to get energy exposure through natural gas. On a trip to Texas earlie r this year, we finalized our next deal…
Ente r: Project Patriot
Proje ct Patriot is composed of three deals. - Natural Gas
- Lithium
- Copper
They are all happening at the same time.
These deals will be launching on Monday May 29th and Ri Members will learn how to invest alongside me - in one, two, or all three deals (it's their choic e).
We o nly have room for 20 new Ri Members. We are going to be offering a 2-day, f irst come first serve sale.
We'll be selling Resource Insider Memberships for $1,499 starting on Thursday May 2 5th until Friday at 5pm (or until 20 new members sign up). Whichever come s first.
We h aven't had a sale at this price point since 2018. We won't be again any time soon. | | | | Cheers, Jamie Keech CIO & Editor; Resource Insider | | | |  | Jamie Keech | | |  | Nick D'Onofrio | | | | | | | THANK YOU FOR YOUR BUSINESS | | | | |
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