Trading in LNG

Not so long ago, gas that was released while oil was being extracted from the ground was pumped back in to put pressure on the oil, so that this black treacly liquid rose to the surface? However, over the years other techniques have been developed and other uses found.

Since the rise in the oil price, the gas price has also risen. The main reason for this is, of course, that gas can sometimes be used as a substitute for oil. Differences are rather obvious, but there are also a few similarities, especially now that gas can also be transported by ship.

Gas can be liquefied (Liquefied Natural Gas, LNG) at specialized gas conversion stations. This process takes place at minus 160 degrees Celsius and the volume of gas, once liquefied, takes up to 600 times less space than it does in its natural state.

Qatar

Russia is the biggest owner of gas. Shell is involved with two Japanese companies in an immense gas project in Shakhelin. But, after Iran, Qatar (with a population of only 750,000) has the third largest gas reserves in the world. Qatar conducts its oil & gas operations through Qatar Petroleum, which controls Qatar's interest in oil, gas, petrochemicals and refining.

Gas constitutes Qatar's main hydrocarbon resource. The North Field is one of the world's largest non-associated gas reserves, accounting for around 15% of the world gas reserves. Despite its large reserves, Qatar accounts for only 1.5% of the global production (based on BP statistics), however, the government is now taking steps to extend and profit from the favourable market conditions.

In order to exploit and distribute gas, significant investments have been made in LNG projects. Quatar is expecting to become the world's number one supplier of LNG within a year.

Pipeline

Additionally, a pipeline from Qatar to UAE is under construction. This will provide new electricity generation plants in Oman and UAE. All aspects, features and products within the energy sector are strongly connected, therefore energy (commodity) exchanges like NYMEX and ICE are listing oil products (futures and options) as well as items related to gas, coal, electricity, transport, pollution emissions, etc.

Dubai Mercantile Exchange (DME) will start listing oil futures in Q4 2006 and as soon as this is successful (liquidity should be at a certain level) other derivatives like oil options, gas futures, etc, will be introduced.

Energy will become increasingly more important, as will everything related to it from transport to pure sweet water. Public utilities are very interesting to invest in, but as those assets become more important, you should familiarize yourself with derivatives (futures and options) with energy products as underlying values. Learn about their specific features and implications.
Stay focussed!

Industries Qatar

However, if you don't want to bet all your money on just gas and derivatives, you can diversify your portfolio by adding some shares of Industries Qatar (IQ) which is the largest listed company in Qatar. IQ's current business operation is the direct holding of shares in four companies operating in the field of petrochemicals, fertilizers and steel.

The company was formed with Qatar Petroleum as its sole founding shareholder, but by an IPO 30% of its interest is placed with individual investors (free float). You may find this an interesting company to keep in mind. Good luck!