Hi, I'm Michael Roomberg, a portfolio manager at Miller/Howard Investments. This video is the third in a three-part series on timely issues related to North American energy focusing on Midstream Pipelines and MLPs, Energy Stock Valuations, and Natural Gas Demand Growth.
For nearly a decade Miller/Howard has expected natural gas, the cleanest burning fossil fuel, to displace coal and nuclear-fired power generation, both here and abroad. This transition is now accelerating globally, and the United States is now the fastest growing supplier of liquefied natural gas (LNG) to the world. LNG demand in China is currently growing at a 50% annual pace, as that country seeks to aggressively combat unsustainable air pollution in the face of insufficient domestic natural gas production.
Back home, this month provided a real-time example of how natural gas is not only a safe, more environmentally friendly power choice for the world, but one that makes economic sense as well. During September, the owners of the Vogtle nuclear power plant, the only nuclear project currently under construction in the United States, voted to continue to proceed with construction despite the fact that their project is already 10 years into a 7-year projected construction cycle, and is now $13B over budget, yet is only 40% complete. For the amount of money this project will now likely ultimately cost, America could build 15 times more natural gas–fired power plants than what will be added with this nuclear facility, in terms of capacity.
Coal is even less competitive, and of course much less environmentally friendly. So despite the political rhetoric to the contrary, monthly figures from the US Energy Information Administration show that coal consumption year-to-date continues to decline rapidly, and we are now using less coal in America than we did in 1983, despite there being 40%, or an additional 100 million, Americans today. Simply put, the demand growth story that Miller/Howard has long envisioned for natural gas remains entirely intact. And importantly for the world, global displacement of coal with natural gas, the cleanest burning fossil fuel, remains one of the most potent and scalable ways to reduce CO2 emissions.
Sources: US Energy Information Administration; International Energy Agency; utilitydive.com.
LNG: Liquefied natural gas is natural gas (predominantly methane, CH4) that has been converted to liquid form for ease of storage or transport.
MLP: Master Limited Partnership is a type of business venture that exists in the form of a publicly traded limited partnership. It combines the tax benefits of a partnership—profits are taxed only when investors actually receive distributions—with the liquidity of a public company.