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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.
LNG Exports a Game-Changer for Natural Gas Stocks
Right now only one large gas-importing country, South Korea, has a free trade deal with the U.S. In fact, non-FTA countries represent over 90% of natural gas demand outside the U.S.
Plus, foreign countries are salivating at the prospect of importing LNG from the U.S., where despite the recent rally, natural gas prices are one-third the price in most nations around the world.
Cheniere has already signed long-term LNG deals with companies in Japan, India, China, the U.K., and France, but it's still in the process of transforming Sabine Pass into an export rather than import facility, and won't actually export until 2015.
That means the second company to receive export approval will enter a market where it can offer a much-needed product at a competitively low cost.
And even though Cheniere's the only U.S. company now allowed to export LNG to non-FTA countries, it's not the only company that's signed long-term export deals with those countries-highlighting the worldwide need for U.S. LNG, as well as the growing belief that more terminals will be approved.
"I expect no more than six LNG export terminals to be approved by 2016," said Money Morning Global Energy Strategist Dr. Kent Moors. "Cheniere was the first; a second approval is on its way; and then there will betwo additional GulfCoast approvals, one on the West Coast and one in Alaska. And the next approval could really get the ball rolling for LNG exports."
After Cheniere's approval, much of the opposition towards another LNG export permit came from manufactures and chemical makers. They argued that increased exports will lead to higher domestic natural gas prices, which could increase the average American's utility bill, and negatively affect the economy.
But a study released Dec 3, 2012 by the DOE quieted much of those concerns…
The study found that exporting LNG would be beneficial to the U.S. economy, and that with the greater the level of exports, the greater the benefit.
So, now that the DOE has stated the economic benefits of exporting LNG, it's just a matter of time before it awards another company permits to export LNG.
Natural Gas Stocks: Picking the "Next Cheniere"
Moors first recommended Cheniere to his readers just two months before it received export approval.
Now he has analyzed the prospects for each of the 11 export terminals awaiting approval, in search of the next one to follow Cheniere's profitable lead.