North America's Energy Is Booming

 | Aug 11, 2014 | 3:00 PM EDT
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No matter where you look, energy is booming. Business is strong. Confidence is up. Projects are starting. More projects are planned. Investments are pouring into most sectors, including oil, natural gas, nuclear, renewable energy and even coal.

While Europe, Asia and the rest of the world are wringing their hands about their dependence on foreign oil and natural gas, North America is largely immune. From an energy perspective, it does not matter what happens to Russian natural gas or Iraqi oil. North America is essentially energy independent.

Of course, the U.S. imports oil. However, it also exports refined products from oil. Taking oil and refined products together and combining energy production of U.S., Canada and Mexico results in energy independence.

It is going to get better. Last week, Mexican lawmakers approved new rules for awarding private oil contracts. According to Bloomberg, "The overhaul is designed to reverse nine years of declining output and boost economic growth. The entrance of foreign producers such as Exxon Mobil (XOM) and Chevron (CVX) will bring in $50 billion of annual private investment by 2020." It will also boost production and exports to the U.S. and other consumers.

Unlike Europe, Japan and China, North America is already energy independent in natural gas. North America is already energy independent in electric power. North America is already energy independent in coal. And North American companies appear to be doubling down. Hundreds of billions of dollars of investment is planned for new energy production and distribution projects.

Producers such as Cheniere Energy (LNG), Dominion Resources (D), Sempra Energy (SRE), Leucadia National (LUK), ConocoPhillips (COP) and others are investing tens of billions in capital in order to export surplus natural gas from the U.S. to Europe and Asia. They are building costly liquefied natural gas production facilities and export terminals.

New natural gas pipelines are under construction. New pipelines are planned. According to the U.S. Energy Information Administration, "Multiple pipeline expansion projects are expected to begin service to increase natural gas takeaway capacity from the Marcellus Shale play, where production has increased significantly. These new projects are focused on transporting gas to the New York and mid-Atlantic regions."

Expansion projects add at least 3.5 billion cubic feet per day (Bcf/d) of additional capacity. More than 2.0 Bcf/d of expansions were expected for last winter alone. The largest of these was the 0.78 Bcf/d New York-New Jersey Expansion project on a portion of Spectra Energy's (SE) pipeline from Linden, N.J., to Manhattan.

NiSource (NI) and Spectra plan additional investments. NiSource plans expansion projects in Maryland. Spectra plans expansion projects for New England. Together, these projects will replace heating oil with domestically produced natural gas.

Although I have warned you that the U.S. nuclear power renaissance is largely on hold, there are new projects under way. The Tennessee Valley Authority, Southern Company (SO) and SCANA (SCG) are all building large nuclear power plants. In addition, Southern, NextEra Energy (NEE) and now Ameren (AEE) are talking about building more new nuclear plants.

Commercial nuclear power is only one source of fuel for North America's grid. Renewable energy is another. Wind and solar projects are going gangbusters. In fact, SunPower's (SPWR) manufacturing capacity hit the wall. The company is currently capacity constrained through 2015. SunPower and SolarCity (SCTY) plan construction of new giga-factories to support exploding demand.

Even the coal sector may see new investments. As I said last week, utilities want more coal than can be delivered. Berkshire Hathaway's (BRK.A) (BRK.B) Burlington Northern Santa Fe and Union Pacific (UNP) will likely add more capacity to handle coal transportation and deliveries.

Southern and NRG Energy (NRG) have major investments in clean coal technologies. For example, within a year, Southern's new Kemper County Energy Facility will go commercial. NRG Energy plans to soon sell carbon dioxide from its lignite-fired coal plants to the oil fields.

Many are wringing their hands over the world's trouble spots. In the meantime, energy investors are seeing nothing but opportunities. North America's energy sector is booming. It is profitable. It is making America strong.

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