LNG Catalysts About to Hand You the investment Opportunity of the Decade
Commodities / Natural Gas Aug 24, 2014 - 06:00 PM GMTBy: Money_Morning
A century ago, the opening of the Panama Canal changed the face of global trade.
By joining the Atlantic and Pacific oceans, ships from the East Coast no longer had to make the treacherous 8,000-mile trip around Cape Horn to reach the markets in Asia or on the West Coast.
Now, 100 years later, the 50-mile long canal is about to do it all over again.
Under a $5.3 billion expansion, the canal is getting a makeover that will allow it to accommodate ships as long as three football fields, with the capacity to carry almost three times the amount of cargo.
Once completed, the “new” canal will help jump start U.S. energy exports to Asian countries that are starving for them.
In fact, it’s just one of two major catalysts that will catapult the U.S. into one of the world’s biggest energy exporters…
Opening Up Asia to U.S. LNG Exports
For U.S. liquid natural gas (LNG) producers and investors, the expansion of the Panama Canal means new marketing opportunities at precisely the right time.
Currently, the 100-year-old canal can accommodate ships of up to 950 feet long and 106 feet wide, with a maximum draft of 39.5 feet.
The largest LNG ships are too large to navigate the canal.
Next year, when an eight-year project to expand the canal is completed, the canal will be able to accommodate ships that are roughly 20% larger and can carry almost three times as much cargo. That means modern supertankers, including LNG-carrying vessels, will be able to navigate the locks of the canal.
For U.S. firms, that could cut the transport time to Asia by 11 days. It also would make it easier and cheaper to transport U.S. natural gas between the East Coast and West Coast, without the limitations of pipelines.
But it’s the second catalyst that will really change the fortunes of U.S. LNG companies
U.S. to Become the World’s LNG Leader
Up until recently, LNG produced in the U.S. stayed in the U.S.
That’s about to change.
Thanks to a recent loosening of export regulations, U.S. companies will soon be able to send tankers of LNG to every corner of the globe.
They can’t wait.
Already, the Department of Energy and the Federal Energy Regulatory Commission have received dozens of applications for export authorization from companies eager to send their LNG overseas. As of July 31, 36 applications had been approved, with five more pending.
The idea of U.S. LNG exports, as Kent recently noted, ” is so strong and unstoppable, that it has the power to change the world. It’s the result of one of the biggest reversals of fortune I have ever witnessed.
“You see, just seven years ago, everyone agreed (myself included) that the U.S. would be using LNG imports to meet 15% of its gas needs by 2020. Now, even Russia’s gas behemoth Gazprom acknowledges that the U.S. could be providing between 8% and 12% of all worldwide LNG exports in just six short years. That’s up from zero LNG exports today.”
In fact, U.S. LNG companies could ramp up even faster than that.
The U.S actually has over 110 existing LNG facilities right now…
But most of these are related to America’s internal pipeline system, or are used for the storage of LNG for domestic use.
However, over the last few years, something very interesting has happened.
Because America’s quantum leap in fracking technologies has completely changed the domestic energy game…
A large number of U.S. coastal terminals originally slated for LNG imports are now in the process of converting into export stations.
Once approved, these terminals could export the liquefied equivalent of 25 billion cubic feet of natural gas per day…
Even at today’s low natural gas prices, that’s over $30 billion a year in domestic revenue.
And as more terminals are built, that number will skyrocket.
So why is LNG such a game-changer?
It’s simple. LNG allows companies to move natural gas anywhere in the world. LNG is simply natural gas that is cooled to -260° Fahrenheit until it becomes a liquid. This process reduces its volume by about 600 times – similar to reducing the volume of a beach ball to the volume of a Ping-Pong ball.
In this state, it can now be shipped anywhere in the world by train, ship, or truck.
As a liquid, natural gas neither explosive now flammable, making it relatively safe to transport. Freed from the limits of pipelines, LNG is a valuable global commodity.
Once U.S. LNG begins arriving in Europe and Asia, Russia’s stranglehold on European and Asian gas supplies is over.
And the U.S. has plenty of it to transport. According to the U.S. Energy Information Administration (EIA), the U.S. became the world’s largest producer of natural gas last year, producing over 24 million cubic feet. That abundance has led to a steady drop in U.S. natural gas prices, making natural gas much cheaper here than in Europe and Asia.
With U.S. natural gas production growth outpacing competitors Russia and Saudi Arabia by 200%, notes the EIA, that advantage is likely to continue.
When that trade begins in earnest, companies like Cheniere Energy Inc. (NYSE MKT:LNG) will be mainstays in a huge move of American-produced natural gas abroad.
Here’s why.
Cheniere has locked in major 20-year export contracts from its terminals on the Gulf Coast. That explains why Cheniere, without having yet produced a single drop of LNG for export, has been on a tear.
A mainstay both of the Energy Advantage and Energy Inner Circle portfolios, Cheniere is up 140% since introduction. Its sister holding, Cheniere Energy Partners, LP (NYSE MKT: CQP), is up 56% and pays a very healthy dividend of 5.3% to sweeten the deal.
The company’s prospects have never been brighter.
The European Union’s (EU) recently unveiled an Energy Master Plan that projects the continent’s “energy landscape” out to the year 2030, but what really worries the EU is much more immediate.
Keeping the lights and heat on during the next year.
The EU, which is starved for energy, is lining up for U.S. LNG exports. So is Asia.
In fact, Cheniere has already garnered no fewer than five huge multi-billion dollar 20-year contracts with some of the largest energy importers in Europe and Asia.
And Cheniere has blanket permission from the U.S. Department of Energy to begin LNG exports.
As the first mover in this space, Cheniere has the best chance of any other company to make a big splash in this market.
And more than any other company, this one is set up to positively explode once the Panama Canal expansion is complete since it will open up the lucrative Asian markets overnight.
To meet this growing demand, Cheniere is developing a liquefaction project adjacent to the Sabine Pass LNG terminal for up to six LNG trains with aggregate capacity of approximately 27 million tons per year (mt/y).
Sabine Pass was the first – and until recently, the only – project allowed to export LNG to countries without a free trade agreement with the United States.
The project sits on the Sabine Pass deep-water shipping channel on the Louisiana side of the border with Texas. It has access to all the major shale gas basins including the Marcellus, Utica, Eagle Ford, Barnett, and Haynesville basins.
The company has also has also initiated a project to develop an LNG terminal near Corpus Christi, Texas. The Corpus Christi LNG terminal is being designed and permitted for up to three modular LNG trains, with aggregate peak capacity of up to 15 mt/y.
Meanwhile, the natural gas boom is already creating new millionaires across the U.S. Here’s how.
Source : http://oilandenergyinvestor.com/2014/08/two-catalysts-hand-investment-opportunity-decade/
Money Morning/The Money Map Report
©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com
Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.
Money Morning Archive |
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
