The only thing that pisses off an oil man more than a dry hole is talk of climate change.
Actually, let me rephrase that…
The only that pisses off an oil investor more than a dry hole is talk of climate change. After all, the fear of potential regulatory controls is very real.
Regulations have already pressured the coal industry, and although it won’t happen overnight, whether you like it or not, new regulations are coming for oil and gas operators, too.
But from an investment standpoint, it’s not all gloom and doom. In fact, as with anything, when the government gets involved, there’s always a way to wet your beak.
The Methane Monster
While the economic benefits of domestic oil and gas drilling cannot be argued, the environmental burdens are a reality. It just comes with the territory.
And while you may or may not be an environmentalist, this should still concern you as an energy investor. Make no mistake — with an avalanche of new data on the pollutive results of fracking comes an avalanche of public resistance and government intervention.
This especially holds true as it relates to the burden of methane leaks.
A recent study published in the Proceedings of the National Academy of Sciences found that emissions rates per second were 1,000 times higher than those estimated by the EPA, which noted that “pound for pound, the comparative impact of methane on climate change is over 20 times greater than carbon dioxide over a 100-year period.”
Now, if you have no interest in discussing climate change, that’s fine. But this article isn’t really about climate change. It’s about a new opportunity for oil and gas investors to profit from new regulations designed to limit methane emissions from oil and gas operations.
Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
$100 Million a Year
Based on new data released by the Environmental Defense Fund (EDF), there seems to be a huge opportunity for companies to profit from regulations that could mandate oil and gas companies limit methane leaks from wells, valves, and pipelines.
EDF data show the oil and gas industry can cut methane emissions by 40% at an average annual cost of less than one penny per thousand cubic feet of natural gas by adopting available emissions-control technologies and practices.
And here’s the rub…
If the full economic value of recovered natural gas is taken into account, the 40% reduction is achievable while saving the U.S. economy and consumers over $100 million a year, and the most cost-effective methane reduction opportunities would create over $164 million in net savings for operators.
The bottom line is that oil and gas producers know these mandates are coming, so they’re trying to get in front of regulations — which, by the way, aren’t limited to the United States.
In fact, just last month, six major oil companies including Statoil, Pemex, and the BG Group agreed to cut methane leaks from their operations. As a result, we’re now seeing a move on companies that provide solutions to mitigating methane leaks.
Most of the companies that provide this kind of work tend to be small businesses and service companies, although two of the bigger players in this field include Health Consultants, Inc., which sells methane detectors, and John Crane, which makes mechanical seals that help keep methane from escaping. John Crane is a part of Smiths Group (LSE: SMIN).
There’s also a very tiny (and thinly traded) penny stock, Synodon, Inc. (TSX-V: SYD), which measures small ground-level gas concentrations from aircraft.
And of course, there’s the all-in-one behemoth GE (NYSE:GE), which also has skin in this game.
While it’s clear that the domestic oil and gas boom is showing no signs of letting up anytime soon, the industry will ultimately have to cater to new regulations on methane leaks.
So we might as well make a few bucks along the way.
To a new way of life and a new generation of wealth…
Jeff Siegel
P.S. Join Energy and Capital and a star-studded cast of financial experts at The World MoneyShow Toronto this October 16-18!
Get the latest stock picks, current market outlooks, most successful investing and trading strategies, and more when you attend the Show at the Metro Toronto Convention Centre.
Registration is FREE, so reserve your place today!
