BlackRock’s Allonby sees North American natural gas renaissance

Poppy Allonby, manager of the closed ended BlackRock New Energy Investment Trust, discusses the implications of plummeting natural gas prices in North America.

US natural gas traded at more than $12/Mcf 4 years ago, today the price is less than $3/Mcf. This dramatic reduction in price is predominantly due to of the advent of ‘shale gas’, where new technologies have been used to unlock gas resources previously deemed uneconomic.

North America now benefits from some of the lowest natural gas prices in the world and this is creating a number of interesting opportunities. Already natural gas is displacing coal for use in power generation. Indeed, some expect coal to lose almost 20% of its market share to gas this year alone.

Looking further into the future, we expect new markets to develop for natural gas. For instance for use in transportation, petrochemicals and for export to Europe and Asia, where gas prices are several times those in the US. On a global basis, natural gas demand is expected to grow at more than twice the rate of oil and coal.

We believe that natural gas will be a disruptive force in energy markets and have positioned the BlackRock New Energy Investment Trust to benefit from this trend. We have over 20% of the fund invested in companies involved in natural gas infrastructure and liquefied natural gas.

 

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