The newsletter Investment U picks Cheniere as a winner in a field yet to be developed .
- The LNG Shortage
Nearly every gas import terminal in the country (there are nine of them) applied for permits to install natural gas liquefaction plants. The reason? The demand for natural gas is booming just about everywhere else in the world.
Qatar, the world’s largest exporter of natural gas, will soon hit its full annual export capacity of 77 million tons, in the face of global demand that can absorb nearly as much as the world can produce.
In the wake of the multiple disasters in Japan, it’s importing an additional four million tons over the next year from Qatar. It’s in negotiations to purchase even more.
Fatih Birol, the head of the International Energy Agency, commented on the opportunities for LNG producers in an article in The Wall Street Journal: “Post Fukushima, there will be a lot of opportunities. Japan and Korea both have new long-term contracts in the next four years, and China’s demand is booming. As of 2015 they will have to import as much as [all of] Europe today.”
According to Frank Harris, an LNG expert at Wood Mackenzie, Asian demand for LNG is going to skyrocket to 241 million tons in 2020 from 138 million tons in 2010.
With worldwide demand on the rise and no new large-scale LNG projects set to come online in the Asia-Pacific region for at least the next five years, the door is open for the United States to provide some of the slack. Nearly every U.S. company that owns a LNG import terminal has plans to add export capability in the coming decade.
The Best Natural Gas Turn-Around Investment
But perhaps the best way to invest in the coming rise in LNG exports is via Cheniere Energy, Inc. (AMEX: LNG). It operates the Sabine Pass LNG facility, in Cameron Parish, Louisiana, and it’s going to be the first LNG export facility to come online.
Cheniere recently received DOE export authorization to export LNG. Construction will begin in 2012, and Sabine is scheduled to come online in stages starting in 2015. It’s also negotiating definitive long-term export contracts with numerous customers. It recently inked a big one with India.
It will take a little over a decade for the United States to switch from being a LNG importer to a LNG exporter.
Exporting LNG will also cause the price of U.S. natural gas to gradually rise, and $5 to $6 gas will be the new minimum floor. What a difference a few years – and 2,000 trillion cubic feet of natural gas reserves – makes.