Baltimore, MD--Liquefied natural gas (LNG) is about to take a major step onto the world stage as the Imex starts trading spot contracts.
The new International Mercantile Exchange (Imex) is expected to open by the end of 2007. Initial plans are to offer refined-products contracts (specifically LNG contracts) in order to serve the rapidly emerging LNG market.
My readers at Wealth Daily already know I feel LNG is set to explode over the next few years.
Just look at the growth in U.S. LNG imports over the last ten years!
Future U.S. LNG imports might grow even more.
Canada's gas resources are in serious decline. Furthermore, natural gas projects aren't being pursued because Canadian oilsands offer more profit. And speaking of oilsands--they require massive amounts of natural gas during oil extraction.
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The problem for the U.S. is that most of its natural gas imports must come from Canada. This is because natural gas markets are regional.
That opens the door for LNG because of its global market. The new Imex will let gas producers reach more favorable markets.
Qatar Control
Qatar is about to become the world's leading exporter of LNG, and will account for more than two thirds of world exports over the next seven years. They have the world's third biggest gas reserves at over 25 trillion cubic meters (roughly 5% of global reserves). In fact, they just started their Barzan project in the North Field with ExxonMobil to tap natural gas resources. Production is anticipated to reach 1.5 billion cubic feet of gas per day. The new spot market for LNG will feel right at home in Qatar.
But what will the new spot contracts mean for LNG?
For starters, it will transform the way gas is sold on the global market.
Most liquefied natural gas is sold on long-term contracts like conventional natural gas. But producers trade a small amount of their spare capacity in spot deals, allowing them to benefit from more profitable markets. For example, 10% of Shell's LNG sales are traded on the spot market.
Spot contracts sold on the Imex could set a new price benchmark for LNG. And according to Imex chairman Esam Janahi, "If Imex doesn't deliver an LNG contract to the market, then someone else will do it."
Future Tidings
I believe that future LNG production will be vital to meeting global gas demand. I've mentioned U.S. demand earlier, but also remember that China and India's economies are growing at a rapid pace.
LNG does have some hurdles to overcome in the future. Exorbitant LNG terminal and tanker costs are the main obstacles. However, rising natural gas prices will keep LNG a viable option.
The new Imex spot market shows that LNG is growing. Over the next two years, there will be many opportunities for you to profit. Every step of the way I'll be keeping my readers tuned in on how to take advantage of our natural gas addiction.
Until next time,
Keith Kohl
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