Two Catalysts are About to Hand You the Best Energy Investment of the Decade

Two Catalysts are About to Hand You the Best Energy Investment of the Decade

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The sudden development of significant unconventional natural gas reserves has put the U.S. in the catbird’s seat.

This “super shift” is so profound, it promises to create a new American dawn.

With enough natural gas to meet current consumption levels for nearly 100 years, America’s growing largess has changed everything we used to think about natural gas.

And today, we’re waking up to a “gas-driven” world.

Now two unrelated factors, thousands of miles apart, are transforming the U.S. into one of the world’s largest liquefied natural gas (LNG) exporters, and sending the share price of my favorite investment through the roof.

Let me explain…

Catalyst No. 1: Capitalizing on the Gigantic Asian Markets

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.

Until a few years ago, however, the 100-year-old canal could only accommodate ships of up to 950 feet long and 106 feet wide, with a maximum draft of 39.5 feet. Dubbed “Panamax” vessels, these ships were once the world’s largest.

Today’s largest ships, including the supertankers that carry LNG, had to either take longer routes around Cape Horn or through the Suez Canal, or not make the trip at all.

The longer trip added both time and costs to ocean-going transport, sometimes making the trip economically unfeasible.

However, under a $5.2 billion expansion, the canal completed a makeover in 2016 that allows it to accommodate ships as long as three football fields, with the capacity to carry almost three times the amount of cargo as before.

The nine-year project to expand the canal was completed in 2016, and the canal was finally 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, are able to navigate the locks of the canal.

The “new” canal helped jump start U.S. energy exports to Asian countries that are lining up for them.

For U.S. firms, that could cut the transport time to Asia by 11 days. It also makes it easier and cheaper to transport U.S. natural gas between the East Coast and West Coast, without the limitations of pipelines.

Making the trip to Asia faster was imperative, and these days, especially so.

See, Asia has been dominating the global demand for LNG for several years now. This is no surprise, because as of October 2018, 4.5 billion people – 59.2% of the global population – live there.

As far as LNG imports go, Japan, South Korea, Taiwan, China, and India are the largest importers in Asia, and through 2030, they will help Asia account for about 86% of the world’s total LNG demand growth.

Now, Japan has typically been the largest importer in Asia for energy resources – it beat China by 45.3 million tons in 2017 – but that is quickly changing as China begins its move from its dependence on coal.

So, when it became known that China was looking to move away from coal – the country’s current primary source of energy – the dollar signs started popping up in liquefied natural gas (LNG) exporters’ brains.

Over the past few years, as China begins to phase out its coal usage, it had been increasing imports from the U.S., both crude and refined oil product.

The U.S. is a major exporter of LNG, with 15% of its exports going to China alone.

With increasing exports moving globally from American producers, it had become a useful lever in diversifying sourcing.

With the LNG business more lucrative than ever, now is the perfect time for the U.S. to take full advantage of China’s need for this vital source of energy.

However, it’s the second catalyst that will really change the fortunes of U.S. LNG companies…

Catalyst No. 2: The U.S. Is About to Become the World’s LNG Leader

LNG has been joining the ranks of crude oil and solar energy to become one of the largest and fastest-growing industries in energy.

And the U.S. LNG business in particular has exploded:

  • U.S. LNG exports quadrupled from 500 million cubic feet per day in 2016 to 1.94 billion cubic feet per day in 2017.
  • Between 2016 and 2020, the U.S. is expected to account for about half of the 20 billion cubic feet per day of new LNG export capacity worldwide.
  • The Energy Information Administration (EIA) expects that U.S. LNG will exceed three billion cubic feet per day in 2018, and push 10 or 11 billion cubic feet per day within a few short years. That’s about one-third of the daily, worldwide demand.
  • U.S. export capacity has shot up from less than two million tons per annum (Mtpa) in 2015 to 18 Mtpa in 2017, and is projected to top 77 Mtpa by 2022, transforming the U.S. into the world’s number two exporter, second only to Australia.

But somehow, the revolution taking place in natural gas has been almost completely overlooked.

Which is exactly why new investors in the industry are set to make a killing.

You see, up until recently, the LNG produced in the U.S. stayed in the U.S. Exports of LNG were forbidden by the federal government.

But today, with fracking and shale gas causing U.S. natural gas production to skyrocket, the regulations have completely changed.

Thanks to a recent loosening of export regulations, U.S. companies can now send tankers of LNG to every corner of the globe.

The Department of Energy and the Federal Energy Regulatory Commission (FERC) received dozens of applications for export authorization from companies eager to send their LNG overseas.

As of October 23, 2018, 3 export terminals were developed, and in January 29, 2018, 11 additional export terminals had been approved. This trend is so strong and unstoppable that it has the power to change the world. It’s the end result of one of the biggest reversals of fortune I have ever witnessed.

Just a decade ago, everyone – myself included – assumed 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 five short years. That’s up from zero LNG exports a couple of years ago.

With our newfound abundance of natural gas, U.S. LNG exports could ramp up very quickly.

The U.S actually has over 110 existing LNG facilities right now. 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.

America’s quantum leap in fracking technologies has completely changed the domestic energy game.

Investing in a Stunning Reversal of Fortune

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 U.S. natural gas prices, that’s over $22 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 is neither explosive nor flammable, making it relatively safe to transport. Freed from the limits of pipelines, LNG is a valuable global commodity.

A few U.S. LNG tankers have already begun arriving in Europe – and once this trend intensifies, Russia’s stranglehold on European and Asian gas supplies is over.

And the U.S. has plenty of LNG to transport.

According to the U.S. Energy Information Administration (EIA), the U.S. became the world’s largest producer of natural gas already in 2013, producing over 66 billion cubic feet per day.

In 2017, that number had grown to 75 billion cubic feet per day. The EIA forecasts that number to increase to 92 billion cubic feet per day in 2020. The rate of production growth is projected to remain positive through 2050 when production reaches 119 billion cubic feet per day.

With U.S. natural gas production growth outpacing competitors like Russia and Saudi Arabia notes the EIA, that advantage is likely to continue.

Cashing In on a Major Market Advantage

The U.S. has another advantage over its natural gas competitors: Prices.

Source: FERC

Thanks to the shale gas revolution, the price of natural gas in the U.S. is about 50% lower than prices in Europe, Asia, and South America, and sometimes even less.

Even with the costs of transporting LNG – and remember, the expanded Panama Canal will drastically reduce those costs – U.S. natural gas exporters can undercut virtually any other natural gas producer in the world.

The Best Way to Play This Unstoppable Trend

Text Box: Cheniere Energy Incorporated NYSE: LNG Market Cap: $21.89 billion 52-Week High: $71.03 Currently Trading: $65.22* *Price as of 5/7/2019 When U.S. exports of LNG begin in earnest, one of my favorite companies, Houston-based Cheniere Energy Inc. (LNG), will be leading the way.

There are several reasons why I think the sky is the limit with this stock.

First, the company’s Sabine Pass Liquefaction facility is the first fully operational LNG export facility in the U.S. As of now, over 80% of the facility’s volume is already spoken for in six huge multi-billion 20-year export contracts.

In fact, in February 2016, Cheniere became the first company to ship LNG from a commercial facility in the United States, leading to over 400 cargoes being delivered from the company to over two dozen countries.

Second, the company’s second major project, the Corpus Christi Liquefaction Project, already had 57% of its projected capacity locked up in 20-year contracts in 2014, since the liquefaction project has been in service since 2018.

And these are “take-or-pay” contracts. Even if buyers don’t take all of the LNG specified in their contracts, they have to pay as if they did. That’s as close to a guarantee as you can get.

In total, Cheniere’s operations have already secured $3.5 billion in future annual fees.

So why are other countries rushing to lock up processing and exporting capacity years into the future?

Because the global demand for LNG is skyrocketing.

Europe is expected to import 28 million tons of LNG this year, and 98 million tons by 2030. Asia is projected to import 200 million tons this year alone, and almost double that by 2030. The Middle East and North Africa will demand 533% more LNG over the same time period.

Source: FERC

Plus, Cheniere isn’t just selling high volumes of LNG. Its margins are strong, too.

As a result of the discrepancy between natural gas prices in America (approx. $2 mmBtu, a measure of a fuel’s energy content) vs Japan (approx. $7 mmBtu) and Europe (approx. $8 mmBtu), Cheniere can offer very competitive prices overseas and still book healthy margins on every sale.

The comparison is even stronger when looking at alternative energy sources, such as crude oil. Currently, worldwide LNG prices are approximately 11-19% of crude oil prices for the same amount of energy.

Even if countries in Europe and Asia could import all of the crude oil they needed to satisfy all of their energy demands – and they can’t – they’d still choose LNG. Because it’s a fraction of the cost.

Long story short, the company’s prospects have never been brighter.

Not only does Cheniere have blanket permission from the U.S. Department of Energy to begin LNG exports, but as the first mover in this space, Cheniere has the best chance to make a big splash in this new market. It’s expected to export 10% of global LNG production by 2020.

And more than any other company, this one is set up to positively explode once the Panama Canal expansion begins being utilized by LNG tankers, since it will open up the lucrative Asian markets overnight.

In short, Cheniere is a play on the future from a company that’s better positioned than anybody else to take advantage of it.

And with LNG exports about to start in earnest, I believe Cheniere could be your ticket to big profits, too. To me, this is the best investment opportunity of the decade.

But it isn’t the only one…

There’s another LNG superstar in the energy coffers.

You see, this tiny $2 million company is on the leading-edge of a whole new global energy sub-niche.

It has a secret weapon which I believe gives them a dominant advantage when it comes to the Department of Energy.

Just click here to learn more about this LNG profit opportunity.


Dr. Kent Moors
Editor, Oil & Energy Investor