On today’s show we’re talking about President Trump’s visit to a project located just down the road from several of our own new development projects. The president was in lake Charles Louisiana to promote the expansion and job creation opportunities associated with liquified natural gas.
The oil and gas industry in America has evolved over the years from conventional oil that some of the very first oil wells in Texas and California produced. These were relatively shallow wells in fairly porous rock. They produced oil, and virtually no natural gas.
The more recent shale wells produce oil or gas and in some cases both. These rock structures have the oil and gas trapped in the rock which is not very porous, and not very permeable. If you think of the rock like Swiss cheese, the porosity of the rock is the size of the holes in the cheese and the permeability is the ability for oil or gas to flow between the holes in the cheese or in this case the rock. In order to get the oil out of the ground, the drillers push water down into the well at about 2000 psi. That high pressure smashes the rock and allows the oil and gas to flow. The oil gets pumped to the surface and is stored in tanks that get emptied on a regular basis and is then transported by truck to the refinery. The gas is lighter than air and just wants to float away. The only way to capture the gas is to pressurize it and transport it by pipeline to an local mini refinery which gets rid of the impurities to ensure the gas is of pipeline grade before being sent down one of the major pipelines.
Natural gas is a great source of energy. But it’s so inconvenient to handle that the average consumer has trouble dealing with it. Most of the worldwide consumption of natural gas is for the production of electricity or home heating.
Natural gas is is one of the cleanest ways of producing electricity behind wind solar and hydro. Much of the electricity in Europe, Asia is turning to natural gas as a cleaner alternative to coal or oil. For example, in 2016, Spain didn’t import any natural gas from the US. In 2018, Spain imported 29 billion cubic feet of natural gas and growing. France is buying from the US, so is Portugal, Italy, and Greece.
Last year the US exported 22M tons of LNG. This export capability was only made possible in 2015 when president Obama authorized the export of hydrocarbons from the US. Today, Lake Charles Louisiana is the largest LNG export hub in the US. The export capacity for LNG is expected to grow by huge multiples over the next decade. Lake Charles is undergoing tremendous growth as a result of these energy projects. It’s driving population growth and employment growth. Most importantly, these jobs are not linked to the price of oil or gas. It’s all about global distribution of natural gas. The widening of the Panama Canal in 2016 opened up markets in Asia.
So what does this have to do with real estate?
We look for market opportunities where the demand is growing and there is a shortage of supply. The president’s motorcade passed directly behind our Maplewood Place RV Park. We built that facility over the past year to house the legions of construction workers who will be temporarily in Lake Charles over the next decade to build the mega plants.
This town needs everything from housing to retail, to office and medical. The President’s trip to the area is shining a spotlight on the opportunity. We believe that the additional visibility will make the market more broadly recognized in the financial markets.
The President’s visit will bring attention to this market and may facilitate future investment. Have a lookout for other places, anywhere in the world where major business activity is taking place. As always, look at those opportunities through the lens of supply and demand.
