Commodity Investing: Maximizing Returns through Fundamental Analysis

CHAPTER 7

Natural Gas

When people think of gas, usually the first thing that comes to mind is what they use to fuel their cars, gasoline. Natural gas sometimes gets overlooked, even though it is a critical part of the global energy supply. As oil deposits become harder to locate and the worldwide demand for hydrocarbons increases, a switch to natural gas has begun. Natural gas was formed during the same process that created petroleum. Plant and animal remains from millions of years ago formed organic material. Over time this organic material was trapped under rock and exposed to pressure and heat. The pressure and high temperatures changed the organic material into petroleum, coal, and natural gas. At low temperatures more oil was formed than natural gas, and at high temperatures more natural gas was formed. Natural gas is a combination of combustible hydrocarbons. It is composed primarily of methane, a gas compound that consists of one carbon and four hydrogen atoms, but it can also contain a variety of other compounds and gases. The purest form of natural gas is almost pure methane, which is called dry natural gas. When other hydrocarbons are also present, it is called wet natural gas.

Natural gas has a long history, although techniques to capture, process, and utilize it are more recent. In ancient history, natural gas would seep through the underground and could ignite. This would create what looked like a fire coming from the earth. One of the most famous instances of this ...