One of the Planet's Most Life-Changing Investment Trends

While most energy-driven headlines today deal with $100-plus oil, dirty coal, dangerous nukes or solar dreams, one cheap, plentiful and clean fuel is usually left off stage out of the spotlight -- natural gas.

That's odd, because Americans use about 62.5 billion cubic feet of natural gas a day, with some 2.1 quadrillion cubic feet in reserve. (One quadrillion is a thousand trillion.) It supplies 65 million households, 5.3 million commercial users and nearly 200,000 industrial-scale customers.

Natural gas is critical to electrical power production and its importance in this area is growing dramatically. In the past 15 years, the amount of U.S. electricity provided by natural gas has grown from 13.2% to 23.2%. The total number of kilowatt hours attributable to natural gas is up 102.3%.

And there are two reasons this trend is going to accelerate in coming years.

First, gas is super efficient; it can approach 60% efficiency, nearly twice that of coal, which makes it an easier and more cost-effective way to generate power.

Second, natural gas is far less polluting than coal, which is similarly cheap and abundant, and is often a fuel of choice for power plants.

But coal is so dirty that the government has considered limiting (or taxing) its use. Few, if any, utilities would be willing to invest billions in a new power plant if its fuel source might not be economically viable because of new regulations.

With nuclear plants difficult and notoriously expensive to site, permit and build, and hydroelectric plants only deployable in limited areas, the only alternative left on the table is natural gas.

But, as they say in the ad business... wait, there's more.

Natural gas 2.0
These deals will continue, but you need to keep another development in mind -- liquefied natural gas, or LNG.

This form of natural gas is created by chilling natural gas to subzero temperatures. It then turns to liquid, taking up only 1/600th the space of the volume of the fuel in its gaseous state. That makes it far easier and safer to transport to areas unserved or underserved by pipelines.

Today, LNG accounts for 7% of worldwide gas demand -- but that's growing. In fact, the business doubled in size from 1995 to 2005. And I expect that trend to continue.

The world has about 15 LNG exporters, which use special cryogenic ships to keep the gas cold, and nearly 20 importers, including Japan, Korea and Spain.

Five new receiving terminals have been built in the United States since 2005, according to the Department of Energy, with imports to total more than a trillion cubic feet by 2015. Other countries will see rapid development of this technology and of natural gas in general.

One place where this is expected to happen: China. A mid-2010 report by the consultancy Wood Mackenzie says China's LNG demand could increase 48% by 2020. Those forecasts were based on China's already-strong imports of LNG; LNG reached a record in April 2010 and imports were up 58% in June from the year before. 
The inescapable abundance of natural gas and the growing scarcity of crude oil is not lost on the petroleum industry. Royal Dutch Shell (NYSE: RDS-A) says half of its output will come from gas by 2012. Of the eight projects completed by ExxonMobil (NYSE: XOM) in 2009, seven were gas-related.

Action To Take --> The major oil companies' large capital expenditures are the single best predictor for the future of the industry. With hundreds of billions of dollars being invested in natural gas exploration, development, refining, distribution and in ancillary technologies like LNG, the "game-changing" future for this fuel -- and for investors who realize its importance -- is very bright.