natural gas cars
There's a worldwide race heating up to supply the world with liquefied natural gas (LNG) and right now the U.S. lags far behind.
But that's about to change, with the U.S. expected to go from 0% of global LNG exports today to 9%-12% as early as 2020.
Investors should get ready because certain natural gas stocks will surge along with the exports.
So far, only Cheniere Energy Inc. (NYSE: LNG) is allowed to export LNG out of the U.S. to both free trade and non-free trade agreement (FTA) countries- it hopes to begin exporting in 2015.
And Cheniere's stock has been on a tear since earning that approval.
When the DOE announced the approval of LNG exports from Sabine Pass on May 20, 2011, Cheniere was trading at $7.69. The stock soared over 30% that day, finishing at $10.04, and today trades nearly 301% higher at $30.82.
Now, investors have another chance to profit from an LNG company.
Once again the catalyst will be approval from the DOE to export LNG to non-FTA countries.
And a non-FTA permit is the key with LNG exports.
Natural Gas Companies Attempt to Make Fracking Safer
Hydraulic fracturing, or fracking, is the most important energy industry development in the past few decades, unlocking value for U.S. natural gas companies.
Its extensive use in the United States is completely reshaping the world energy scene.
But there is one question that lingers over the U.S. energy industry: Is fracking safe?
One of those saying fracking is 100% safe is sometimes controversial oil billionaire T. Boone Pickens.
Natural Gas Prices Could Triple – And So Could Your Profits
Natural gas prices are finally turning around, hitting multi-month highs - and piquing the interest of legendary investors who say the commodity has a lot higher to climb.
While most commodities are moving lower in price - some quite sharply - natural gas has soared in 2013.
The June natural gas futures contract on Monday settled at $4.392 per million BTU, putting it up 31% so far this year. This makes natural gas the top performer among the 24 commodities in the Standard & Poor's GSCI index.
Noted contrarian investor Jeremy Grantham of GMO Asset Management is among the natural gas bulls. He recently told a value investing conference in Toronto that investing in natural gas at today's low prices is a no-brainer.
Why I'm So Bullish About Natural Gas
I just arrived in Texas yesterday for my latest round of oil meetings.
The crude market continues to absorb accelerations in investment despite of some lateral price movements. That will be an important topic of discussion.
But my interest has moved in another direction.
Natural gas futures closed on the NYMEX on Thursday $4.14 per 1,000 cubic feet (or million BTUs). We have not seen prices reach these levels in quite some time.
The Best Way to Invest in the Natural Gas Rebound
Today, let's talk about how investors can make some money off this.
As gas prices inch toward $4 per 1,000 cubic feet (or million BTUs) on the NYMEX futures market, we need to remember that this is not going to be either an accelerated rise or one that will be without volatility.
For reasons mentioned on Friday, gas prices will likely cap out in the mid-$4 range by the time we reach midsummer.
That means there are not going to be any across-the-board influences raising the entire sector. This is going to require some patience and selective investing.
So how does one structure an approach to this?
Why This Chinese Company Is Investing in U.S. LNG
A private energy company based in China is reportedly investing in the construction of a network of liquefied natural gas (LNG) fueling stations in the United States.
According to a Reuters report, ENN Group Co. Ltd. is teaming with a small U.S.-based company, and the partnership plans to open 50 to 60 LNG fueling stations this year. LNG stations cost an average about $1 million each to build, industry experts say.
ENN has already built a number of natural gas fueling stations in China, which is much further along in use of LNG for heavy trucks than the United States.
LNG's been promoted by investors such as T. Boone Pickens and natural gas producers including Chesapeake Energy Corp. (NYSE: CHK) as a cheaper, cleaner fuel for long-haul trucks.
Now more natural gas companies are teaming up to provide LNG, which means more investment opportunities for energy investors.
Natural Gas Companies: Shell's Huge LNG Win
Shell will buy a portion of Repsol's LNG assets for $4.4 billion in cash and $2.3 billion in financial leases and assumed debt - more than double pre-sale estimates, according to Bernstein Research.
Tuesday's deal underscores the looming importance of LNG to natural gas companies and the global energy market.
"LNG overcomes the primary problem faced by natural gas users," explained Money Morning's Global Energy Strategist Dr. Kent Moors earlier this year. "Available supply is traditionally limited to where pipelines are running. LNG, on the other hand, cools gas to a liquid, allowing it to be transported by tankers almost anywhere by water, regasified at an import terminal, and then injected into the local pipeline network."
This opportunity means huge profits for companies - and investors - who get ahead in the LNG market.
Shell's Big LNG Win
Shell believes global consumption of LNG will double from now until 2025. Earlier this year, Shell's ECO Peter Voser said he expects gas to play a significant role over the next 40 years, with much greater growth rates than oil.
Voser said in November 2012 that Shell plans to invest $20 billion in natural gas products globally over the next few years.
One of the reasons Shell pursued this current deal was to get Repsol's stakes in a major LNG project in Trinidad and Tobago, in addition to a small project off coastal Peru. Shell previously had no presence in these emerging regions.
Operating in these regions gives Shell the ability to provide gas to Latin America, and use its Nigerian gas operations to service Asia. That'll save the company shipping costs and boost profit margins.
"This is a perfect complement to what we have. We get a West Atlantic position and an East Pacific position. These were blind spots," Maarten Wetselaar, Shell's executive vice president told The New York Times.
The deal comes with a fleet of specialized LNG carrier ships and will add 30% to Shell's LNG supplies, according to The New York Times.
Macquarie Securities estimated Shell will now have 6.6 million tons of LNG to trade, or about 20% of its total volume.
Why Natural Gas Companies are Chasing LNG
Five U.S. Natural Gas Companies Set to Soar from an Export Boom
A U.S. Energy Department study released Dec. 5 has intensified the debate on what America should do with its abundance of natural gas - which could lead to huge opportunities for natural gas companies.
You see, critics of exporting natural gas have argued that exporting the resource to global markets would hurt the U.S. economy by raising natural gas and oil prices.
But last week's NERA Economic Consulting study, done at the DOE's request, showed the United States would get a positive economic boost from exporting liquefied natural gas (LNG), even under all possible scenarios in which exports are envisioned.
"Across all these scenarios, the U.S. was projected to gain net economic benefits from allowing LNG exports. Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased," the study found. "In particular, scenarios with unlimited exports always had higher net economic benefits than corresponding cases with limited exports."
The study could increase the chances of the Energy Department approving permits for natural gas companies to build LNG export facilities. Only one company has ever been approved to build an LNG export terminal, and at least 15 more LNG export projects are waiting for the green light.
Here's why companies are vying for a piece of the LNG export market.
How LNG Leads to ProfitsLNG is simply natural gas in liquid form, and when it is liquefied the cooling process actually reduces the space LNG occupies by more than 600 times.
That makes transporting LNG on tankers much easier than moving natural gas through pipelines. It also allows companies to sell natural gas overseas, where natural gas prices at $11.83/MMBTU are about 3.5 times higher than U.S prices at $3.4/MMBTU.
Money Morning Global Energy Strategist Dr. Kent Moors says the export of LNG from the U.S. to global markets "is the single most significant change in the energy market for the next several decades."
"American operating companies recognize the LNG market will provide a major outlet for surplus production," said Moors. "Last week while I was in Moscow, Russian natural gas giant Gazprom again gave an estimate. They now believe that the U.S. will account for 9-12% of the world's LNG flow before 2020 from 0% today."
Natural Gas Companies to WatchSome U.S. natural gas companies are ahead of competitors in setting up LNG-export facilities.
Investors who want to profit from LNG exports should keep an eye on these:
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2013 Natural Gas Forecast: Six Bullish Reasons Why Now Is The Time to Buy
Natural gas is developing into a very different market from oil, one that offers plenty of opportunities for investors to make big profits in 2013.
There are two contrasting dynamics when it comes to natural gas prices. First, the amount of recoverable volume has been accelerating, thanks to increasing unconventional (shale, tight, coal bed methane) reserves and technological improvements to extract it.
A rise on the supply side would generally reduce prices, especially if the number of operators continues to increase. More gas moving on the market from more suppliers results in a downward pressure on prices.
The second dynamic, however, is moving in the other direction, enticing the increase in drilling and expansion of infrastructure.
This factor considers the demand side, and there are at least six major trends colliding to increase the prospects for gas usage as we move through 2013.
As a result, I expect natural gas prices to see a 25% increase from current levels... here's why.
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The Brewing Shale Gas Energy Boom That Nobody is Talking About
While folks back in the U.S. were sitting down to Thanksgiving dinner, I was making my way back to Frankfurt, Germany from Warsaw, Poland.
My discussions in the Polish capital were with the PGNiG, the national state-run gas company and the government's designated partner in all domestic drilling operations.
Unlike my German conversations, there is considerable optimism these days that the energy picture in Poland is about to change in a major way-thanks to shale gas.
Poland must overcome a serious of challenges, which, of course, were the reasons for our meetings. And despite the upbeat tenor of everybody involved, significant concerns have emerged.
On the positive side, Polish officials have committed to a rapid development of unconventional gas. In addition, no domestic opposition to drilling exists, at least not yet.
Unlike back in Germany, nascent environmental movements have neither the political clout nor the apparent interest in making this an issue.
Polish operations are currently in a very early stage, which may be the reason for the lack of opposition. Only a few test wells have been drilled (less than 15 in all), and none are near residential populations.
For that matter, PGNiG is preparing to start its first horizontal drilling operation. The test wells thus far have all been spud by foreign companies.
However, it is now clear that the "rapid" ramp up foreseen by the authorities in the central government is not working out as anticipated back at the well sites.
For one thing, the initial wells have either come in dry or produced disappointing gas flows. For another, the national gas company is under considerable pressure to produce positive results in what is becoming a very challenging technical environment.
The former result is hardly surprising. There remains insufficient geology and preliminary field prospecting. The locations of shale deposits are well known. The country has no less than five very promising basins. But Mother Nature has an irritating habit of indifferently placing hydrocarbons in those basins.
That requires initial evaluations before the expensive proposition of sinking exploratory wells commences. Thus far, the few wells attempted have been positioned with little more than rudimentary data and guesswork. The poor initial results, therefore, reflect such considerations more than anything else.
There seems little doubt that there are considerable reserves, but finding where they are remains a major undertaking.
Here challenges exist that are not a problem back in the United States.
But solving them could lead to huge breakthroughs for companies in the U.S. and energy investors alike.
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