An American Comeback? Nah...
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- Published on Monday, 01 October 2012 13:43
- Written by Andrew Snyder, Editorial Director, Inside Investing Daily
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Despite the action here in the States, the global energy boom is just getting started. There is much, much more money to be made.
Here's a fact you'll enjoy. In the 1920s, my home state of Pennsylvania represented the world's fourth largest economy. It got that big and that rich because it produced 25% of the world's energy.
Of course, things have changed. We squandered our wealth and managed it poorly. And now the Keystone State is just another name on the global list of small-time producers.
But the pendulum never stops swinging.
When we look back on 2012, we'll look at this as the year things changed. The momentum is increasing... and the money is flowing.
Take the brand-new Philadelphia Energy Solutions project, for example.
This refinery project is so special (or is it so lucrative?) that it brought politicians from both sides of the aisle together to celebrate its launch.
The plant we're talking about has been in existence for 140 years. It has seen the rise and fall of several energy booms. But over recent years, Sunoco (the plant's former owner) had a tough time making money with the refinery. It couldn't make money importing OPEC's oil.
But that's changed. In a big way.
In a sign of the times, a private equity company bought the plant. It then created a joint venture with Sunoco to turn the plant into a monster in the domestic energy market.
Right now, the facility refines 20,000-30,000 barrels of shale oil per day. But when it gets the rail car unloader it is building... that number will surge to as much as 180,000 barrels of the Bakken's finest black gold.
It's a similar story with natural gas. The plant will soon be a "major consumer" of Marcellus gas. The first step in the process is to create what the industry calls a "cracker" -- it boosts the refinery's efficiency and increases the quality of its crude. The process takes a lot of natural gas... which it will get from Pennsylvania.
But the most interesting angle -- at least, from the standpoint of an unconventional investor -- is the fact the refinery will use a natural gas-fueled cogeneration plant to produce some 600 megawatts of electricity.
There's even word of a gas-to-liquids plant in the not-so-distant future.
And all of this... from a domestic fuel source.
If we were to put our xenophobic blinders on and close our minds to what's happening elsewhere on the planet, we'd naturally think Pennsylvania might be on its way back to a leadership position.
But, alas, it's not. At least, it won't hold the reins for long.
Not if our economic frienemies in China have anything to do with it.
Beijing's Boom
I am excited about what is happening in China these days. It is exactly the kind of opportunity that spawned so many millionaires (and even a few billionaires) here in the United States over the last century.
Last Monday, China opened its second round of open bidding for the rights to shale gas blocks. It put 20 units -- totaling more than 20,000 square kilometers -- up for bid. It's a huge swath of land, compared with the inaugural bid round held last year. That "test" round offered just four blocks and was closed to international bidders.
The latest round, though, is the real deal. The bidders still must have ties with Chinese firms, but now the international conglomerates we're all familiar with will get full access to the bidding process through their joint ventures in the country.
When we look back at China's gas industry in a couple of decades, we will look at this event as the spark that lit the inferno.
It marks the pivot point from speculation to true growth.
I am watching several storylines unfold... all with strong profit potential. But one area that intrigues me the most right now stems from the fact that the Chinese government is widely expected to allow companies to import the technology they need without paying any taxes or duty on the goods.
If you missed out on domestic sleeper stocks like infrastructure provider Williams Companies (WMB:NYSE), consider the action in China your second opportunity.
I am so intrigued by the idea that China is willing to open its economic borders to infrastructure providers, I'm going to take a bit of a road trip.
No... I'm not going to China. I have nightmares about being stuck on a plane that long. But there's also not much to see there yet, except a few dozen test wells.
Instead, I'm going to Nicaragua next month.
The Central American country has an interesting deal it calls Law 306. It is very similar to the plan China has in the works.
But its law is not aimed at the energy industry. Its sights are set on tourism providers. Nicaragua wants foreigners to invest, so it bribes them with incredible tax incentives.
If you want the full details... click here.
It's all very similar to what China just announced it will do. But there is one major difference... Nicaragua's law has been in effect for much longer (since 1999).
That means our boots-on-the-ground research in November will very likely give us a firsthand look at exactly how we can tackle China's revolutionary energy industry and get the very best return on our money.
I wish the Keystone State would regain its spot as a global leader -- it'd be great for my wallet -- but what we're seeing here at home is only a sliver of what's happening across the planet.
This boom is just getting started.
Editor's Note: I just had breakfast with my Pennsylvania Congressman... little did I know he'd alert me to a Natural Gas fracking scheme. Politicos and power brokers like Nancy Pelosi see the massive potential. One billionaire investor snapped up 5,547,604 shares of a company with a "money-making patent." Here's why you, too, need to get on board before Obama signs H.R. 1380.
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