Natural Gas Stocks: Time to Pick the Next Winner in LNG Export Race

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.

Moors said it only makes sense to retrofit Cove Point, the largest importing facility on the East Coast, into an exporting giant.

Moors said that Cove Point's location on the western shore of Maryland's Chesapeake Bay is ideal for exports. Cove Point has a central location along the East Coast and would offer a straight shot to Europe and parts of Africa.

Its owner, Dominion Resources Inc. (NYSE: D), already has companies lined up just waiting to export LNG.

Dominion's signed 20-year deals to export LNG with Pacific Summit Energy LLC, a U.S. affiliate of Japanese trading company Sumitomo Corporation, and GAIL Global (USA) LNG LLC, a U.S.-affiliate of GAIL (India) Ltd., the largest natural gas processing and distributing company in India. In addition, Dominion will serve Tokyo Gas Co. and Kansai Electric Power Co. through its agreement with Pacific Summit.

And because of its proximity to the northeast, Dominion chairman, president and CEO Thomas F. Farrell II says that Cove Point will be a premier facility in terms of direct access to the Marcellus and Utica shale plays, two of the most promising natural gas basins in North America.

Together, these factors in the Cove Point project have cemented Dominion as the front-runner for the next approval.

"No other proposed liquefaction facility can provide the strategic value in terms of supply and location," Farrell said in a recent press release. "We believe that having achieved milestones of signed terminal service agreements, an engineering, procurement, and construction contract and our FERC filing, we are well positioned to obtain permission from the U.S. Department of Energy to move forward with this vital infrastructure project."

Like I said earlier, Moors expects that along with Dominion's Cove Point there will be four other export terminals approved by 2016.

Besides a boost to those companies, LNG exports will transform America from a net importer of energy to a net exporter before this decade's up.

The possibility of exporting LNG, the effect it will have on the U.S. economy, and which companies stand to benefit the most when exporting begins, are subjects that we follow closely here at Money Morning.

To learn more about companies that will receive approval to export LNG after Dominion, as well as several energy plays, check out Energy Advantage. As a world-renowned energy expert, Moors has conversations with energy leaders other investors could only dream of listening to.

And his picks have been on fire of late- in 2013 he's closed out four 100%-plus winnersalready- three refiners and an MLP.

Now Moors has his sights on companies set to profit from the Marcellus and Utica shale booms, as well as other ways to play LNG, such as shipping companies and several MLPs.

You can learn more about these investments here.

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