LNG Stock Prices: Three Reasons 2014 Will Bring the Biggest Gains Yet

The best example of how developments in the liquefied natural gas export boom can boost LNG stock prices is Cheniere Energy Inc. (NYSE MKT: LNG) - which soared 118% over the past year.

That may be just the start of the fireworks for LNG stock prices - especially Cheniere.

lng stock prices

Morgan Stanley released a forecast for the stock on Jan. 7, 2014. It initiated coverage at an "Overweight" rating with a price target this year at $60 a share. That's over a 30% gain from its current price of $45.76.

And that's on the low end...

The firm said its most bullish scenario sees Cheniere at $129 a share this year.

Cheniere won't be the only LNG stock to head higher. Check out these three reasons why LNG stock prices will continue to climb in 2014 - and why Money Morning Global Energy Strategist Dr. Kent Moors calls LNG "one of the best investment opportunities of the decade."

Why LNG Stock Prices Are Going Up

Reason No. 1: China Is Buying
China continues to turn more to natural gas as a solution to the country's air pollution problem. It aims to triple the use of natural gas by 2020 to above 300 billion cubic meters from approximately 100 billion cubic meters now.

And it's moving quickly.

China only began importing LNG in 2006, but by the end of 2012 it had six LNG import terminals in operation. The total capacity of these terminals is 18.8 million tons of LNG.

Four of the terminals are run by CNOOC Ltd. (NYSE ADR: CEO) and two by the parent of PetroChina Co. Ltd. (NYSE ADR: PTR).

By the end of 2014, China will have another six LNG import terminals operational with another two under construction. Added capacity is expected to be about an extra 28.8 million tons.

In addition, its first floating LNG terminal is now operational.

Reason No. 2: Companies Tap Into More Shale Gas
The rosy outlook for LNG was given another boost by BP's Energy Outlook 2035 released on Jan. 15.

The chief economist for BP, Christof Ruhl, said that shale gas would grow to become "up to 21 percent of global energy production by 2035."

Leading the way will be U.S. natural gas output, which BP expects to climb by 45% over that time. BP believes U.S. shale gas production could conservatively double to 65 billion cubic feet per day by 2035.

Ruhl forecast the United States will become the world's largest producer of natural gas, accounting for 20% of the global market by 2035.

All of this gas is more than the United States can consume, which is why BP sees the U.S. becoming the second-largest exporter of LNG by 2035, trailing only Australia.

Large and increasing amounts of LNG exports should flow through to the bottom line and support LNG stock prices.

Reason No. 3: There's a Customer Waiting List
With U.S. natural gas prices about a quarter of prices in Asia, thanks to the shale boom, LNG projects have had no problems attracting eager customers from Asia.

Cheniere has five customers lined up for the output from its Sabine Pass facility, including India's Gail and South Korea's Kogas. Its still unapproved Corpus Christi already has Indonesia's PT Pertamina as a gas buyer at a higher price than Cheniere will receive from the contracts signed for Sabine Pass.

Freeport LNG, which is 50% owned by ConocoPhillips (NYSE: COP), has Department of Energy approval to sell LNG. Among the Asian companies it already signed contracts with are Osaka Gas, Chubu Electric of Japan, and South Korea's SK.

The Cove Point project controlled by Dominion Resources Inc. (NYSE: D) received the government okay last year, too. Its future Asian customers include the likes of Japan's Tokyo Gas and Sumitomo.

Even the still unapproved (it's next on the list) Cameron LNG project controlled by Sempra Energy (NYSE: SRE) counts several Japanese firms in its customer base, including Mitsui, Mitsubishi, and Tokyo Electric Power.

Look for even more LNG project go-aheads in the United States in 2014.

Last May, President Obama said he supported U.S. gas exports and expects the United States to become a net gas exporter by 2020.

A top official at the U.S. Energy Department, Christopher Smith, said export licenses could be issued every two months. Even if that timeline slips, more projects should get the green light in 2014 from the Obama administration.

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