And along the way, a small group of LNG stocks will become the main focus for investors.
Remember, the LNG process cools natural gas to a liquid form, allowing it to be shipped over long distances. Upon arrival, the liquefied gas is returned its original state before being injected into pipeline for delivery to foreign consumers.
Already, the construction of LNG receiving terminals in Asia and Europe is accelerating.
The European and Asian markets have the biggest need for imports. These markets have a need to meet rising demand and restrain the prices commanded by long-term pipeline-delivered gas.
Luckily, LNG can do both.
Traditionally, natural gas has only been able to develop regional "spot" markets. These are locations where the availability of volume provides an opportunity for traders to execute a price for a quick sale (usually within 72 hours).
This is because the availability of product depends upon the development of import pipelines, which are multi-year, capital-intensive projects.
LNG, on the other hand, can be delivered to a terminal, so it can provide an immediate increase in available local supply.
To the extent that the LNG trade can be sustained, new spot markets are immediately formed around the hubs that develop at the intersection of terminal and delivery pipelines.
And now Qatar - one of the world's largest producers of conventional gas (that is, from freestanding gas fields) - has banked on LNG being the wave of the future.
Qatar has become the first country to commit all of its production to the LNG trade.
And that is a huge vote of confidence for this market.
Considering the number of new tankers involved, this single decision jolted the global shipbuilding industry into one of the most significant increases in business ever recorded.
The Qatari decision was just the first step...
A Global Boost for LNG StocksNew export terminals are being built by other major gas producers - Russia, North Africa, and Canada. Our neighbors to the north have clearly signaled where the U.S. will be moving next.
A project is moving forward at Kitimat, British Columbia, on the North Pacific coast. It is scheduled for completion in 2014.
Developers originally intended this project to be an LNG receiving facility. But by the time the construction began, the intended flow of gas had changed by 180 degrees.
Today, this facility will be 100% committed to exporting LNG.
And the reason is the same one that is prompting so much U.S. discussion...
The resulting largess was depressing prices. So they decided to export more to Asia as LNG.
Currently, the U.S. has no significant export facilities.
But Dominion Resources Inc. (NYSE: D) has applied to retrofit half of its Cove Point, MD receiving terminal (the largest on the East Coast).
Meanwhile, Cheniere Energy Inc. (AMEX: LNG) is hard at work developing the Sabine Pass terminal complex on the Gulf of Mexico, after obtaining the first blanket export approval from the U.S. Department of Energy and landing some huge 20-year contracts from major international LNG importers.
Additional moves are afoot, like a high-profile decision by BP PLC (NYSE: BP), ConocoPhillips (NYSE: COP), and Exxon Mobil Corp. (NYSE: XOM) to develop a joint LNG export project.
And just this week, the Brookings Institute's Energy Security Initiative announced that the lower 48 states will be producing more gas than the U.S. needs for the foreseeable future. That means the door is now wide open for the U.S. to begin exporting in significant amounts.
But there are distribution problems that could affect the overall trade amounts and the market impact from American exports in the near term.
A Man, A Plan, A Canal, PanamaWith Cove Point and Sabine Pass, there will be direct access to Europe from points on the U.S. East Coast.
However, there are no terminals on the West Coast, making movement of LNG to Asia far too expensive.
This is because LNG tankers are too wide to make it through the Panama Canal.
That is... they are for the next two years.
The Panama Canal is currently being dredged and widened - a process scheduled for completion in 2014, just as the bulk of U.S. LNG exports begin in earnest. The new configuration will accommodate the tankers and cut time (and transport costs) significantly.
With both Europe and Asia open for exports, and new terminals being built at a record pace on both continents, there will be a welcome new way to reduce pressure from our shale gas glut.
And an American-based industry, along with the technological advances upon which it is based, will find a ready and expanding global market.
That's especially good news for oil and energy investors. LNG stocks are set to take off.
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