I’m currently on a boat heading from Sydney, Australia to Cairns – with a quick stop in Indonesia.
After my visit to Australia, I can say with absolute certainty that its resource market is alive and kicking.
Australia is resource rich and has benefited the most from the boom in China.
As you know, China has a seemingly unquenchable appetite for natural resources. And Australia supplies the country with just about everything.
But there’s one resource that Australia ships to Asia that many investors in the United States aren’t paying attention to.
Yet it’s arguably the only resource that’s currently in hyper-growth mode.
Ignored By American Investors
You see, the past couple of years have been brutal for the Australian mining industry.
A combination of weaker demand from India and China – along with massive tax levies on miners – has all but sucked the growth out of the sector.
The industry is showing signs of life once more, of course, with policies now shifting towards business thanks to a new government. And the possibility of easing tariffs on gold and silver in India makes the sector’s future look even brighter.
However, while many investors might be focusing on the mining industry for future growth, that’s not where we’re looking.
Instead, I’ve set my sights on the liquid natural gas (LNG) sector.
Few are aware that Australia is among the top exporters of LNG in the world. And it will soon approach the likes of top Middle Eastern and global exporter, Qatar.
Now, there are two key factors when it comes to establishing dominance in this industry: proximity and supply.
And the Aussies are unmatched in both.
Australia ships LNG to the big Asian industrial economies of Korea, China and Japan.
And it boasts massive reserves under its barren (and sometimes inhospitable) terrain, which is almost as big in area as the Continental United States.
Not to mention the Aussies have few population issues to deal with when drilling for gas. Australia’s population is just over half that of California, coming in at around 23 million people. And most people are based in the major cities like Sydney, Melbourne, Brisbane and Perth.
So while the United States is still building LNG facilities – and quibbling politically about exporting some of the massive supplies of gas – the Australians have been selling LNG for years.
And not cheaply, either.
Thanks to little competition, the Aussies have been able to charge more than $15 per million Btu for the energy. And it doesn’t appear that the equation will change anytime soon, as the United States is still years away from becoming a competitive threat.
Heck, even when the United States begins to export LNG in any quantity, probably by the end of this decade, the country is only projected to supply about 11% of the world’s demand for LNG.
The Australians will still supply over 25%.
That spells opportunity for investors who are willing to look offshore to profit from the boom.
The Search for a Pure-Play
Big U.S. companies like Chevron (CHV) and big Australian companies like BHP Billiton (BHP) come to mind as ways to play the natural gas boom.
However, these giants are not pure-plays on LNG, and they have other businesses that dwarf their LNG operations. BHP is a major mining company deriving much of its revenue and profits from non-energy investments, while Chevron derives most of its revenue and profits from oil.
So any growth in their LNG businesses will be overlooked by other ventures.
On such merits, it might prove beneficial to turn our focus to local companies that are intensely focused on the Australian gas and LNG sector.
These growth companies might make for some excellent acquisition targets by the majors, and we’ll explore a couple in the next issue.
Also, Chief Investment Strategist, Louis Basenese, is getting ready to release a natural gas recommendation of his own to WSD Insiders. The March issue will hit subscribers’ inboxes early next week. So if you haven’t elevated your subscription to Insider status, go here to do it now.
And “the chase” continues,
Karim Rahemtulla
The post Secret Tanker Discovered Transporting “Liquid Gold” appeared first on Oil & Energy Daily.