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The media has bee drowning us in natural gas talk. They must have a point! But why is natural gas so appealing all of a sudden? Don’t worry, there is a good explanation. Street Authority explains it all.

Natural gas is critical to electrical power production and its importance in this area is growing dramatically. In the past 15 years, the amount of U.S. electricity provided by natural gas has grown from 13.2% to 23.2%. The total number of kilowatt hours attributable to natural gas is up 102.3%.

And there are two reasons this trend is going to accelerate in coming years. First, gas is super efficient; it can approach 60% efficiency, nearly twice that of coal, which makes it an easier and more cost-effective way to generate power. Second, natural gas is far less polluting than coal, which is similarly cheap and abundant, and is often a fuel of choice for power plants.

But coal is so dirty that the government has considered limiting (or taxing) its use. Few, if any, utilities would be willing to invest billions in a new power plant if its fuel source might not be economically viable because of new regulations. And with nuclear plants difficult and notoriously expensive to site, permit and build, and hydroelectric plants only deployable in limited areas, the only alternative left on the table is natural gas.

Natural Gas 2.0

These deals will continue, but you need to keep another development in mind — liquefied natural gas, or LNG. This form of natural gas is created by chilling natural gas to subzero temperatures. It then turns to liquid, taking up only 1/600th the space of the volume of the fuel in its gaseous state. That makes it far easier and safer to transport to areas unserved or underserved by pipelines.

Today, LNG accounts for 7% of worldwide gas demand — but that’s growing. In fact, the business doubled in size from 1995 to 2005. And I expect that trend to continue. The world has about 15 LNG exporters, which use special cryogenic ships to keep the gas cold, and nearly 20 importers, including Japan, Korea and Spain. Five new receiving terminals have been built in the United States since 2005, according to the Department of Energy, with imports to total more than a trillion cubic feet by 2015. Other countries will see rapid development of this technology and of natural gas in general.

One place where this is expected to happen: China. A mid-2010 report by the consultancy Wood Mackenzie says China’s LNG demand could increase 48% by 2020. Those forecasts were based on China’s already-strong imports of LNG; LNG reached a record in April 2010 and imports were up 58% in June from the year before.

The inescapable abundance of natural gas and the growing scarcity of crude oil is not lost on the petroleum industry. Royal Dutch Shell (RDS.A) says half of its output will come from gas by 2012. Of the eight projects completed by ExxonMobil (XOM) in 2009, seven were gas-related.

Now that you have a better understanding of why natural gas has growing need, you can better evaluate the natural gas stocks battling it out in the marketplace. Since natural gas has gained so much attention, you might as well pay some of your own attention towards them as well. Here are the 15 most watch natural gas stocks.

Sources: Motley Fool, Motley Fool CAPS.

Reported by Andy Obermueller, Read the entire article here.

Chart by Dan Dzombak, Read the entire article here.

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