One convincing gas stock

By Jonathan Jackson. Published at Jul 15, 2019, in Energy

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China has the largest population on earth, with 1.42 billion people.

And as its population grows, so too does its demand for natural gas. China, as you would expect, is the world’s biggest energy user.

It has been reported that China’s gas demand will expand by 30 billion to 40 billion cubic meters this year, in part due to China’s ongoing policy to move away from goal to gas.

However, there are problems.

Surging demand for clean fuel amid China’s crackdown on coal, has highlighted a lack of storage capacity that makes it difficult for the nation to cope with supply crunches in winter months.

Furthermore, the Chinese government is desperate to avoid a repeat of the 2017-18 Chinese winter where millions of households were left without power due to severe gas shortages.

With a three-fold increase in gas demand expected within 15 years, the Chinese National Development and Reform Commission (NDRC) has urged gas producers to increase their output and speed up construction and development of infrastructure in key gas fields to ensure supply security.

China has also started to construct the middle part of the east line of a natural gas pipeline connecting Russia and northern China that starts from Changling in the northeastern province of Jilin and ends at Yongqing in Hebei province.

As reported by Energyworld.com, “the project is part of the 3,968-km China-Russia natural gas pipeline with an annual transmission capacity of 38 billion cubic metres, aiming to meet increasing demand in populous Beijing-Tianjin-Hebei region.”

Meanwhile, opportunities have opened up for smart companies to assist China in meeting its growing demand.

Take the $20 million capped Elixir Resources (ASX:EXR) for instance, which has an exceptional board driving it including Chairman Richard Cottee, who famously took Queensland Gas Company (QGC) from a $20 million capped junior into a $5.7 billion takeover play and ex-Santos executives Neil Young and Stephen Kelemen.

EXR has a gigantic, independently certified 7.6 trillion cubic feet (risked “best” or mid case) coalbed methane (CBM) Prospective Resource in southern Mongolia, a region with zero gas production.

The company’s gas resource sits within a giant 7 million acre (30,000 square kilometre) Production Sharing Contract (PSC) known as the Nomgon IX PSC – the only coal seam gas PSC issued by the Mongolian government.

Mongolia could benefit greatly should EXR be able to unlock the value of its potentially giant clean energy resource.

And so too could China.

EXR’s resource is right on China’s border; it’s a massive prospective gas resource acreage of export scale and is of comparable size to Santos’ GLNG acreage in Queensland.

That’s big.

The other factor working in EXR’s favour is its proximity to Rio Tinto’s Oyu Tolgoi copper and gold mine.

Oyu Tolgoi sits within EXR’s acreage and with the $60.7 billion capped mining giant under increasing pressure to find an energy supply from within Mongolia’s borders instead of bringing it in from China, EXR could be the likely supplier.

Having now met all regulatory milestones, EXR is set to begin drilling within a few months and news flow is expected to flood in with potential catalysts expected.

From Mongolia, to China to Rio Tinto, EXR is well-placed.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

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