Energy: Exploration and production
In 2001, shale gas accounted for less than 2% of U.S. natural gas production, while it currently accounts for almost 30% and is expected to grow to 49% by 2035.4 This "shale revolution" has been driven by advances in technologies such as horizontal drilling and multistage hydraulic fracturing. These have accelerated the large-scale exploration and production of dry natural gas (methane) as well as oil and natural gas liquids (ethane, propane, butane) in the United States. Already, we have seen a large shift in trade, with the United States exporting about one million barrels of refined products per day, and these trends are projected to continue. Opportunities exist where emerging reserve areas are being exploited and older areas rejuvenated. Investors can also take advantage of "orphan" assets divested from large energy companies that are rebalancing their asset portfolios. In addition, investors can capitalize on energy service companies that provide equipment manufacturing, engineering, construction and maintenance services to exploration and production companies.
Energy infrastructure
Lack of infrastructure provides a potentially interesting investment opportunity. Nearly $33 trillion is needed for energy infrastructure to meet demand over the next 25 years.5 New intrastate and interstate infrastructure is required to gather, process, transport and store energy products in the United States. Existing infrastructure is inadequate, as it is not connected to new emerging reserve areas. Opportunities exist to transport resources from low-cost production regions (such as the United States) to regions with less supply and more expensive resources.
Application of new technologies to recover oil and gas, and a lack of infrastructure to transport these resources, is creating opportunities.
Outside the United States,
natural gas remains expensive
Total consumption, million barrels per dayAnnual growth, million barrels per day
Source: FactSet. As of June 30, 2012. It is not possible to invest directly in an index. Past performance is not indicative of future results.
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Sources of gas supply in the United States continue to shift,
driven by the shale revolution
Global oil demand, million barrels per day
Source: Gartner, company data, Credit Suisse estimates. As of April 12, 2012.
Source: ExxonMobil 2012, "The outlook for Energy: A view to 2040."
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4 Source: U.S. Energy Outlook 2012.
5 Source: HIS International Energy Agency World Energy Outlook 2010.
The views and strategies described herein may not be suitable for all investors. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument.
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