natural gas etf
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.
Why T. Boone Pickens Likes These Natural Gas Companies
Legendary investor T. Boone Pickens has been called the Warren Buffett of energy investing, and over the years he has built up quite a legacy.
From his days as a wildcatter drilling in unknown oilfields, Pickens went on to start his own oil company, Mesa Energy, take on the likes of Exxon Mobil Corp. (NYSE: XOM), and manage a hedge fund, BP Capital.
As the head of Mesa, Pickens became known as a corporate raider, caught up in the deal-crazy days of the 80s. His first deal was to purchase energy company Hugoton Production Co. - a move made famous by the fact the company was 30 times the size of his own.
And today, at age 84, Pickens is still buying up energy stocks.
When you analyze his current top 10 holdings, it becomes clear natural gas companies are among his favorites.
We here at Money Morning certainly agree natural gas companies are primed to profit from the surge in U.S. natural gas production, largely a result of fracking, which has dramatically changed our country's energy outlook.
Less than 10 years ago, it was estimated that as much as 15% of our domestic gas would have to be imported in liquefied natural gas (LNG) form by 2020.
But now, the U.S. is projected to be a net exporter of gas by 2020, accounting for 9%-12% of global LNG trade.
And by 2040, U.S. consumption of natural gas is projected to rise more than 25% from 2010 levels, and domestic natural gas production is expected to climb more than 45% during the same period, Exxon Mobil said in a recent energy outlook.
So how do investors best tap into this trend?
Why Britain is Looking to U.S. for 20 Years' Worth of LNG
With its domestic natural gas reserves nearly depleted, the U.K. is turning to a U.S. company to supply enough liquefied natural gas (LNG) to provide energy to nearly 2 million British homes for 20 years.
The deal has big implications for companies involved in the flourishing U.S. shale gas industry, in which gas is extracted through hydraulic fracturing, or fracking.
You see, fracking has led to an abundance of natural gas and will go a long way toward making the U.S. a net exporter of energy instead of a net importer in the coming years.
That, of course, will be a big boon to natural gas companies that export LNG.
Why Japan's Desperately Seeking U.S. LNG
The Fukushima nuclear disaster has had a dramatic impact on the country's nuclear industry - and that's opened the door for major developments for liquefied natural gas (LNG).
You see, two years after the Fukushima nuclear disaster in Japan, only a few of its more than 50 nuclear power plants have been restarted.
Before the nuclear disaster, Japan had relied on nuclear energy for 30% of the country's electrical power and had planned to increase that to 40%.
Now, the lack of nuclear power has left a big gap between demand for energy and supply.
That's why Japan has sharply increased its imports of liquefied natural gas. In fact, it's now the world's largest buyer of LNG.
In 2012, Japan imported a record 87.31 million tons of LNG, an increase of 11.2% from 2011. It imported LNG from sources including Qatar, Russia, Australia and Indonesia.
The LNG industry has reaped huge gains from Japan's surge in LNG use - and the industry stands to gain much more in coming years.
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