Exporting natural gas from this country has proven to be a contentious and slow moving process. However Kinder Morgan (NYSE:KMI) has, once again, found a "loophole" to exploit—Mexico. And Texas drillers like Rosetta Resources (NASDAQ:ROSE) are in prime position to benefit along with the pipeline giant.

An export fight
Companies from chemical manufacturers to aluminum producers have been calling for a go-slow approach to the export of natural gas. America's Energy Advantage explains why: It claims that more than 5 million additional jobs could be created in this country by 2020 if natural gas prices remain at current levels. However, if exports are allowed, it fears that gas prices could jump by as much as 50%.

No wonder there's push back against exporting and a very slow approval process for new export hubs. That said, Rich Kinder, CEO of Kinder Morgan, highlighted a growing gas export market that doesn't need terminals built or, more importantly, export permission: Mexico.

In Kinder Morgan's first quarter conference call Kinder noted that, "we believe that over the next 10 years demand will more than double from the present throughput that goes into Mexico today." Why? "They are converting electric generation at industrial use from oil to natural gas ... [a] cheaper source of natural gas is clearly from Texas."

That's good news for Kinder, where industry watchers have been questioning the company's growth prospects. In an attempt to assuage investor concerns, Kinder Morgan has been disclosing its backlog, which stands at about $16.2 billion worth of projects across all of its controlled companies. The long-term opportunity in Mexico, however, is largely absent from that number.

Where's the problem?
Thus, there's still plenty of room for Kinder Morgan to expand its massive natural gas pipeline system. And, with regard to Mexico, there's no need for a long approval process because of the free trade agreement between that country and the United States. Better yet, members of Kinder family of companies are down 10% or more over the past year while similarly large competitors are up over 20%.

KMI Chart

KMI data by YCharts

Note that Kinder Morgan's dividend was 11% higher year over year in the first quarter. Better yet, CEO Kinder commented that the company handled approximately a third of the country's gas in January. And, "We are seeing unprecedented demand for natural gas transportation capacity." This might be a good time to pick up an industry giant on the cheap.

Texas is your neighbor
For those with concerns about Kinder Morgan, however, another way to play Mexican natural gas demand is to find a well positioned gas driller -- Like Rosetta Resources. Rosetta operates out of the Eagle Ford Shale in South Texas and the Permian Basin in West Texas. That puts the driller in prime position to send natural gas south of the border.


(Source: US CIA)

Natural gas and natural gas liquids accounted for about 70% of Rosetta's production last year. The company's $1.1 billion 2014 capital program includes plans for up to 150 new wells. With nearly 90% of that budget earmarked for drilling, Rosetta's goal is to increase production by up to 30% in 2014.

And Rosetta's bottom line performance has been solid, too, despite heavy spending on new wells. For example, earnings per share have gone from just under $0.40 four years ago to almost $3.40 last year. So the driller is doing well, and having a vital market to its south that is starting to make greater use of natural gas just makes the story that much better.

Finding the opportunity
Since its formation from the ashes of Enron, Kinder Morgan has been finding lucrative ways to grow—satisfying the increasing demand for natural gas in Mexico is just one example. With a relatively out of favor stock, it might be a good time to review Kinder. However, if you want direct gas exposure, Texas-based Rosetta is doing well and is positioned to benefit from the same Mexican demand Kinder is looking to satisfy.

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Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Kinder Morgan. The Motley Fool owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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