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Get Ready for a Second Natural Gas Boom

By now, you’re aware of the American natural gas boom.

Thanks to the twin technologies of hydraulic fracturing (fracking) and horizontal drilling, the energy-producing capabilities of the United States have completely changed the global energy landscape.

U.S. natural gas reserves have exploded from 192 trillion cubic feet to 862 trillion cubic feet, and production has surged more than 35%.

But that’s only the beginning, because a second natural gas boom is underway – and it’s taking place in a country that’s twice as big as the United States and has a reputation for its massive repository for natural resources…

Russia.

Frankly, I was surprised to find that Russia hadn’t already fully employed modern fracking and horizontal drilling technology. But Bloomberg reports that the technologies have only been used for a small fraction of wells.

Well, that’s all about to change…

  • TNK-BP (TNKBF) plans to use the technologies in half the wells it drills this year, a six-fold increase in just two years.
  • Rosneft Oil (OJSCY) will drill 50 wells with the new tech this year, up from three last year.
  • Gazprom (OGZPY) plans to double the number of horizontal fracking wells it drills this year.
  • And Lukoil (LUKOY) will up last year’s number of 215 wells to 450 this year.

So just how big can this boom be?

Well, Russia isn’t just home to the largest natural gas reserves on Earth, it’s also the world’s top natural gas exporter. And that’s without these new production methods.

Considering what these technologies did for the United States, it stands to reason that Russia will experience an even bigger boom than we did.

As far as its effect on the market, the immediate impact on prices may not be felt here, but Europe will likely see lower natural gas prices. And the spread between West Texas Intermediate (WTI) crude (the American price) and Brent crude (the European price) will probably narrow, as well.

For investors, the aforementioned Russian firms could perform admirably. But it almost goes without saying that over-the-counter Russian stocks can be risky – even if they’re large, established companies.

For that reason, you might also consider some of the major North American oil and gas services magnates. After all, they have a head start in terms of technological development and are large enough to manage the risk that’s inherent to working in Russia.

The leading candidates there are Baker Hughes (BHI), Halliburton (HAL) and Schlumberger (SLB).

And “the chase” continues,

Matthew Weinschenk

Matthew Weinschenk