Will Japan's Crisis Benefit Natural Gas?


"We will, in all probability, become a more gas-centric world."

Motley Fool, Shubh Datta

In the wake of Japan's nuclear crisis, natural gas appears to be emerging as the winner.

Natural gas, which primarily consists of methane, is the cleanest of all fossil fuels. It is available abundantly in Canada and the United States. Japan is currently the world's largest consumer of liquefied natural gas.

The largest producers of natural gas are the U.S. and Russia. A shift to a more gas-powered world would mean an expanded market for natural gas and long-term opportunities for these countries.

Although an energy-hungry world is finding it difficult to satiate its thirst, safety concerns are hampering the global nuclear revival. The Japanese crisis couldn't have come at a worse time. The global demand for energy is expected to more than double in the next decade. Considering this, we can expect a surge in natural gas consumption in the future.

To meet domestic energy demand, Japan, which is the largest consumer of natural gas, will have to raise its fuel and gas imports after nearly one-fifth of its nuclear power capacity had to be shut down after the quake and tsunami. Intermittent blackouts, expected to continue at least until the winter, are further complicating the matter.

Since the Japanese disaster, the markets have reacted to the increased interest in natural gas by pushing up the gas prices by 10% and sending prices of uranium, which is used in production of nuclear power, off 30%. Global natural gas production has risen by nearly 44% in the last two decades while gas reserves have grown by 67%. Prices have stabilized around $4.38 per thousand cubic feet last year after peaking to a high of $13.58 per thousand cubic feet in 2008.

In the next few years, we can expect gas demand to significantly increase and new gas plants to be set up around the world. We will, in all probability, become a more gas-centric world.

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