LNG: America's Greatest Energy Export
Liquefied natural gas (LNG) has become one of the most important and profitable American exports for both investors and corporations alike.
LNG is already making billionaires richer: American hedge fund manager Carl Icahn has watched the value of his holdings in Cheniere Energy (NYSE: LNG) nearly double since becoming the majority shareholder in late 2015.
Icahn's stake in LNG is worth over $1.5 billion today
And LNG is highly profitable for back-end services supporting the energy industry: Trafigura Group, one of the world’s leading independent commodity trading companies, said this week that the company's 1H 2019 profits increased by 92% due to a strong performance in oil and petroleum products trading, particularly LNG.
Natural gas has completely transformed the American energy industry in the past 15 years. With new technologies like hydraulic fracturing and sideways drilling being introduced in the mid-2000s, natural gas production soared in states like Pennsylvania, Texas, and Colorado.
But just being able to produce more natural gas was only part of the equation. Producers also needed new buyers. Fortunately for them, they've found those buyers with the help of Mr. Donald Trump.
To understand how we got here, we need to take a step back in time by three decades.
In the early 1990s, the world's largest natural gas field, called South Pars, was discovered off the coast of Iran in the Persian Gulf. Since then Iran has been trying to develop that massive resource to supply domestic needs and export to Asia and Europe.
But U.S. politics frowns on that. The U.S. and Iran have been at loggerheads since the 1970s (for multiple reasons), and politicians on both sides of the aisle have been trying to disrupt the development of South Pars ever since its discovery.
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In 1996, then President Bill Clinton signed the Iran and Libya Sanctions Act into law, which targeted European and Asian firms investing more than $20 million in the Iranian oil sector.
More rounds of sanctions against nations dealing with Iran during the George W. Bush administration followed.
Obama went against the grain, allowing Iran to gain access to more than $100 billion in assets frozen overseas, resume selling oil on international markets, and use the global financial system for trade. But President Trump put an end to that and drew a new line in the sand with fresh sanctions.
All this has led to a recent downturn in Iran's economy, pushing the value of its currency to record lows, quadrupling its annual inflation rate, driving away foreign investors, and triggering protests.
It also means countries in Asia and Europe are going to need to look elsewhere for oil and natural gas.
In steps LNG.
Liquefied natural gas is exactly what it sounds like. It's natural gas that has been cooled down to liquid form. LNG takes up about 1/600th the volume of natural gas in the gaseous state. This makes it easy and safe for non-pressurized storage or transport.
In May, the European Commission (EC) reported LNG imports from the U.S. have increased by 272% since 2018. EC data shows record LNG imports coming from the U.S. in March 2019 totaling 49 billion cubic feet.
But that's only the beginning.
Last month, U.S. Energy Secretary Rick Perry signed two export orders that will more than double America's LNG exports to 112 Bcf by next year.
And the European Commission says LNG imports could increase from there to 282 Bcf by 2023!
The deals to sell the LNG have been signed, there's political support from all sides to get it sold, and the infrastructure that's needed for transport is rapidly being developed. There's never been a better time to be an LNG investor.
Fortunately, the mainstream market is too wrapped up in other more dramatic investing headlines to be concerned with boring old liquefied natural gas. Meatless hamburgers... CBD... meatless CBD burgers... these all dominate financial headlines instead.
But the smart money is betting big on LNG. Resident oil and natural gas expert Keith Kohl is putting his money in a newly discovered oil and natural gas region of Texas.
This massive area could rival some of the biggest American energy resource discoveries in history. And it could be the next millionaire-making area waiting to pay out to early investors.
Until next time,
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bubble and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
Energy Demand will Increase 58% Over the Next 25 Years
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