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Good News for Investing in Natural Gas: U.S. Government Approves Sabine Pass Plant

That breeze gusting through the streets this morning isn't the sign of a coming storm.

That's a collective sigh of relief coming from those investing in natural gas companies after a torrid first quarter for the sector. Natural gas prices have collapsed below $2 per 1,000 cubic feet for the first time in a decade.

And that's not even adjusted for inflation…

But on Tuesday came the first positive sign in months.

The U.S. government approved the development of the Sabine Pass plant, the first natural gas export facility in the lower 48 states.

CNN Money reports:

"The Federal Energy Regulatory Commission [FERC] voted in favor of Texas-based Cheniere Energy's plan to build a giant natural gas liquefaction and export terminal at Sabine Pass, which straddles the Texas-Louisiana boarder just north of the Gulf of Mexico.

Although environmentalists have threatened to sue to stop the 500-acre, $10 billion project, Cheniere says it plans to start building before July."

Something to note – isn't it ironic that environmentalists share the blame for the natural gas revolution?

Over the past decade, every environmental group from the National Resources Defense Council to Greenpeace supported natural gas development as a steady alternative to coal-power plants. They argued that natural gas was a vital bridge fuel to a clean economy.

Well, be careful what you wish for: Fracking and horizontal drilling have been breakthrough processes for the natural gas industry, and they have the potential to create tens of thousands of jobs across all of the shale fields around the United States.

But the real news here is the fact that the opportunity for natural gas arbitrage is alive and well, and slated for late 2014 when Cheniere Energy Partners L.P. (NYSE: CQP) opens this facility.

With natural gas prices around $11 in Europe and $14 in South Korea (a bridge to the Asia-Pacific markets), U.S. producers and exporters can get a much better profit from exporting their production than from the market price of less than $2 here in the States.

There are seven other applications currently awaiting approval from FERC to export liquefied natural gas (LNG). The next big announcement will likely come from Dominion Resources Inc. (NYSE: D), which seeks to covert its import terminal at Cove Point in Maryland into an LNG shipping terminal.

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  1. Sherlita Queen | May 7, 2012

    Great article and very informative.

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