It’s no secret that the U.S. has become the world’s largest natural gas producer. In November alone – the most recent monthly figure available – we produced an average 91.5 billion cubic feet per day.

That’s up 3.8% from the year prior.

And according to a new report by the Energy Information Administration (EIA), America’s use of the fuel shows no signs of slowing. The EIA is forecasting a 0.7% increase in demand for 2016… and 1.8% in 2017.

[ad#Google Adsense 336×280-IA]But I think demand will be even higher...

There are several different drivers of demand coming.

For one thing, as I mentioned in my last column, coal is on its way out.

In recent years, utilities have increasingly switched from coal to natural gas as their baseload power plant fuel of choice.

In April, natural gas officially displaced coal, generating 31% of electric power in the U.S. while coal generated 30%.

This is a major shift from 10 years ago. Back then, coal was responsible for 50% of our nation’s power. Natural gas accounted for a mere 19%.

What caused the big change? Two things. Gas became cheaper thanks to the shale revolution… and Obama got tough on greenhouse gas emissions.

Restrictions on emissions levels have contributed to the shuttering of 72 gigawatts of coal-fired electrical generation capacity. As I previously noted, that’s roughly enough to light 44.7 million homes.

This year, an additional 7.300 gigawatts of coal-fired power will be lost. From 2017 through 2022, about seven more will disappear.

Those are just projections, though. The real numbers could be much higher.

Why?

Because the EPA isn’t done yet. Under its Clean Power Plan, it expects to issue even tougher regulations regarding CO2 emissions. And many utilities aren’t waiting for the new EPA rules.

Southern Company (NYSE: SO) is taking more steps to reduce its coal use. In fact, it’s voluntarily retiring plants that burn coal. And it’s easy to see why…

New natural gas-fired plants are inexpensive to build. What’s more, they are efficient and run on the cheapest fuel we have.

Of course, declining coal use isn’t the only force driving up natural gas demand…

For the first time ever, the U.S. is a major exporter of liquefied natural gas.

Texas-based Cheniere Energy Inc. (NYSE: LNG) is due to make its first international shipment in February or March.

That will be a monumental first step for the company, as well as U.S. energy as a whole.

But the largest demand driver for natural gas comes from the industrial sector. In 2015, industrial plants used 21.7 billion cubic feet per day (Bcf/d) of natural gas. That’s a 24% increase from 2009.

In 2016, industrial use is expected to increase another 3.9% to 22.5 Bcf/d.

A lot of this new demand is coming from new fertilizer and methanol plants. They use natural gas as a feedstock.

Now to the real burning question… What’s the best way to play this situation?

There are a few U.S. exploration & production companies that focus on the natural gas market. Of them, I like Gulfport Energy Corporation (Nasdaq: GPOR). It’s working in the Utica Shale play in Ohio.

Right now, the company is bouncing off its 52-week low of $20.21, which occurred back in December. It’s still well off its 52-week high of $52.28, making it a model of the sort of “rubble” plays Alex covered yesterday.

On a grander scale, Gulfport Energy is a strong bet on growing U.S. natural gas demand. Investors wanting a piece of this uptrend should consider picking up a few shares right now. There is plenty of upside from here.

Good investing,

Dave

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Source: Investment U