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My 2019 Long Levered Natural Gas Bull Thesis 

Kumar Thangudu
Kumar’s Natural Gas Sector Bull Thesis

Disclosure: My gambles here from least risky to most risky were $FCG, $UAN, and $TELL. I now believe the nat gas bull thesis is strong, but I believe picking the winners is harder now and the thesis is now mainstream. This is not investment advice. 
"In short, China 1000x'd the number of compressed natural gas vehicles in their country in 15 years. They rely heavily on imported natural gas. America is the mecca of natural gas with 65M homes that have natural gas piped in. We often ask 'who killed the electric vehicle' when we should ask 'who killed the compressed natural gas vehicle."   - Me in early 2019
Not investment advice. 
Tldr: My ongoing thesis is that natural gas consumption / kwh will go up for mankind as a %. Feel free to dm me at or tweet to me there. 

I began with this thesis in December 2019 and made my bets right around then to March 2020. Published here in mid-2021-ish. 

Air Quality Problems 
  • Viable non-US nation states will provide increasing incentives to clean up air quality issues. Natural gas burns clean. 
Natural Gas Vehicle and Station Proliferation 
Natural Gas Peaking Plant expansion 
Added by people other than Kumar: 
  • For nearly 2 entire  years (2019 and 2020), natural gas was below the general break even price. And much so in certain months. 
    • Haynesville break-even is as low as $2.05 with median near $2.25 
    • Marcellus break- even is as low as $1.55 with median near $1.85
  • For the past 6 years, natural gas prices have been near or the break even point.
  • (opinion) To recoup past losses, suppliers will naturally increase price (or shut down) irrespective of many demand trends for a sustained period of time. 
  • Natural Gas supply (U.S.)
    • ~135 Bcf of supply from US (from Rystad Energy). 
    • Permian operators will be able to ramp gas production (+25 to 35% in next 3 years) with new pipelines going to Mexico, Corpus Christie (LNG export), and local markets
    • Haynesville operators have increased rig activity and location advantage to Gulf Coast LNG export
    • Marcellus and Utica (North East) will meet US demand but actively seeking ways to get to Gulf Coast via new gas pipelines
    • EQT largest independent natgas producer; using electric & dual-fuel fleets to complete wells and others watching to see how the company reduces diesel costs and increase use of “field” natgas
    • Global: 10 billion boe (barrels of oil equivalent) discovered in 2020 
    • Risk: 
  • US Commercial Vehicles, Demand
    • Logistics continue to grow to increased imports, ecommerce, and short-haul demand
    • LNG / CNG has better energy density and fits heavy-duty long distance requirements
    • Dual-fuel engines from CAT are aggressively being adopted by oilfield companies. CAT is deploying across Mining and other industries
    • Fedex contracted CNG truck fleet for long-haul and electric fleets for short-haul
    • Top 3 commercial vehicle fleet have ~300,000 trucks/tractor-trailers
  • LNG Supply / Demand
    • LNG production is expected to reach 672 Mt in 2040 with US, Middle East, and Mozambique. Good graphic on gas markets supply/demand 
    • China adding 2-3 LNG terminals and currently has 22 LNG plants able to receive 81 Mt/y
    • CNPC expected China's pipeline gas imports to reach about 100 Bcm by 2025, nearly double from the 2019 level
    • Risk: US policy, if Biden limits export capability
  • Idiosyncratic market
    • Important to understand that natural gas/LNG market is not analogous to oil market
      • Difficult to transport and store; high fixed costs of midstream, floating and fixed liquefaction, regas, etc. infrastructure
      • Mostly producers and end-users drive the market; unlikely there will be a “global benchmark price” or hyper liquid spot/derivatives market that resembles Brent or WTI
    • Risk: US policy, if Biden limits export capability
  • Global Natgas Demand
    • S&P estimates ~5% increase in 2021
    • Shell demand estimates
      • 1% global CAGR in
      • Asia 
        • 3% CAGR gas demand
        • 4% CAGR lng import (600 BCM by 2040; currently ~ 300 BCM)
    • BP 
      • statistical review of world energy 
  • Renewable Natural Gas
    • Not sure if you include this but methane from landfills have lower carbon intensity
    • RNG primer -