Wind's Our Future, but Natural Gas Is Now
by: Marc Courtenay
posted on: August 07, 2008
The attacks on T. Boone Pickens' plans -- everything from his integrity and self-interest to his quixotic nature -- as Jim Cramer says, "just makes no sense whatsoever. They hold no water at all.
They are just wrong and misguided. The people against him, the ones that call him a dreamer, are the ones who have done no homework and are deeply cynical. And if they don't keep their mouths shut, we will forever be addicted to foreign oil."
While much of what Pickens has been saying is that wind power can be substituted for a lot of other power sources, the fundamentals of his plan involves getting autos to start using natural gas.
Putting aside his personal interests and according to Cramer, Pickens cares about the impact on the environment, but only so far as he has been the most influential investor in alternative energy for years and thinks it can be profitable -- Pickens' true motivation is that the technology for what he believes should happen is unfolding and available right now.
Let's review the quintessential elements of Pickens' plan. First, wind power, which is clean and efficient and able to be integrated to the grid much more easily than the critics say -- ask Quanta (PWR), which does it -- and can be used in far more places than just Texas.
We are, according to Jim Cramer, "... blessed with windy areas that have no use otherwise, and you can build cheap towers, turbines and blades without much opposition."
When it comes to wind power, we have the technology, we have the raw ingredients, we have the abilities, we could take wind to 20% of our power by 2030, as the Department of Energy says, but we could cut 10 years from that with generous subsidies, which might happen under an Obama presidency.
It is natural gas, though, that is the great conundrum, the great game-changer that few politicians and most pundits just don't get at all. Every natural gas, oil engineer and executive in the world knows that we have had 100 years' worth of natural gas underground in this country domestically -- not off the coasts, but within our borders.
Dry Natural Gas Proved Reserves by Area - As of 2006
Source: EIA - Office of Oil and Gas
Check out the Dry Natural Gas Proved Reserves in the USA by the billions of cubic feet. The dark blue area are the areas with the richest and most abundant proven reserves followed by the aqua blue areas which are now, two years later, showing signs of even more prolific amounts of gas.
It gets easier to get at every day, which is why you keep hearing about all of these "shales" that have gigantic finds -- just go look at Devon's (DVN) numbers which came out Wednesday if you don't believe me.
Look at the drilling! Look at the drilling that Chesapeake (CHK) is doing. I believe 100 years of nat gas -- which is two-thirds cleaner than oil including on the CO2 side, which is the most toxic pollutant -- is conservative.
So when you look at this fuel, you realize it should be used instead of gasoline as soon as possible. It is abundant, cheap, there are pipelines everywhere, it doesn't need to be refined, and it burns clean. What's lacking? Filling stations and cars. But not the technology for either, just the infrastructure.
As Cramer likes to rant, "Wind and natural gas are the ways of the future, with nat gas the important bridge fuel for the next 20 years. We are so much closer to energy independence with cleaner energy than we have any time ever, but nobody cares, except the visionaries of this business: Boone Pickens and Aubrey McClendon" (CEO of CHK).
The future is here. It is investable and here. We can buy the natural gas companies that are drilling big-time like Devon, Cabot Oil & Gas (COG) and Chesapeake -- and the company that makes the rigs that will make more drilling possible: National Oilwell Varco (NOV) whose price is now quite attractive.
Jim Cramer sums it up by saying, "This is the single best theme in the market I know. It is why I stick with natural gas even as they have plummeted severely. I stick with it because I believe that under a new, more intelligent administration, this will all become obvious and the stocks will reflect this long-term thesis."
I couldn't agree more and there are many more, much smarter people than me who enthusiastically agree. All it takes is some vision and some uncommon sense.
Disclosure: Long DVN and NOV.
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