Liquefied Natural Gas, And How You Profit
What Is Liquefied Natural Gas?
For the first time in history, select companies will be exporting liquefied natural gas (LNG) overseas from the contiguous US. That’s right, the first LNG export plant is expected to send its first super-cooled cargo across the open sea later this year.
But before I show you how to potentially profit from the onset of LNG exports, let’s discover what it is.
As you are likely aware, natural gas is a vital energy resource. Towns and cities around the world rely on natural gas for heating and electricity generation purposes.
But the fact is, many millions of consumers aren’t anywhere near a natural gas field. And in some cases, it simply isn’t feasible to build a pipeline to these consumers.
That’s where LNG comes in…
Through a process called liquefaction, natural gas is cooled to -160 degrees Celsius, at which point it condenses into a liquid. In this form, it can be safely and efficiently transported from where natural gas is abundant to where it’s not.
Such is the case between the US and Japan.
As you know, the US is sitting on massive natural gas supplies thanks to a new well drilling and completion technique, commonly know as fracking.
On the other hand, Japan is an energy-starved nation that gets just over 20% of its national energy supply from natural gas.
Since the country has very limited petroleum and natural gas reserves, it relies on imports. In fact, Japan is the largest importer of LNG in the world.
As you may have guessed, companies are already positioning themselves to cash in on the situation…
LNG Exports: A Mega-Industry In The Making!
Due to enormous differences in availability, it should come as no surprise that there are huge price discrepancies between the US and Japan. Henry Hub natural gas traded in the low $4 mmBtu range for most of 2014 while Japanese LNG averaged $15 mmBtu!
Clearly, there’s a profit opportunity here…
Even when the cost of liquefaction and shipping is factored in, a company can still collect a handsome profit from LNG exports.
Speaking of which…
Here are a few companies leading the LNG export charge:
- Cheniere Energy $LNG – This company was the first to achieve permitting from the US Department of Energy for LNG exports in the contiguous US. Their Sabine Pass, Louisiana export terminal is expected to send its first shipment in late 2015.
- Sempra Energy $SRE – This company’s subsidiary, Cameron LNG, got approval for their Hackberry, Louisiana LNG export project in June 2014. The company estimates the facility will be fully operational by 2019.
- Dominion Resources $D – With their Cove Point, Maryland project, Dominion will have the first LNG export terminal on the East Coast of the US. The project is estimated to be up and running by June 2017.
- ConocoPhillips $COP – ConocoPhillips owns the only operating LNG export facility in the US. But it’s outside the contiguous US near Anchorage, Alaska. However, the company is also a major investor in the Freeport LNG project, which will be situated on Quintana Island, Texas.
The four companies above are the only ones to have completed the full approval process with the DOE and the Federal Energy Regulatory Commission (FERC). However, there are 15 proposed LNG export projects that could be approved in the near future.
I’ll keep a close eye on new approvals and report to you in future issues.
Bottom line…
When Cheniere Energy starts exporting LNG later this year, it will represent a sea change in the global energy industry. Energy experts estimate global LNG demand could more than double from 30 billion cubic feet per day (bcf/d) to 65 bcf/d by 2025!
This trend will not only benefit the companies above, but should also reward US natural gas producers as demand for the commodity rises.
Until Next Time,
Justin Bennett
Commodity Trading Research
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at http://commoditytradingresearch.com/free-sign-up.
Category: Commodities
