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Locking up LNG Profits in 2020

Written by Keith Kohl
Posted October 30, 2019

What is the future of natural gas?

At first glance, it’s an easy answer: It’s LNG, isn’t it?

That’s probably the first thing that pops into the head of any investor looking to get a jump on natural gas investments... and it should.

Just consider the growth.

The first application to export liquefied natural gas out of the U.S. arrived on the Department of Energy’s doorstep back on August 11, 2010.

It took less than four weeks for it to get the green light.

Then Cheniere Energy became the first U.S. LNG exporter after a shipment left its Sabine Pass terminal in February 2016.

That year, approximately 187 billion cubic feet of liquefied natural gas was exported from the United States.

Two years later, our LNG exports had grown nearly six-fold to more than 1 trillion cubic feet:

In 2019, we surpassed that amount in the first eight months of the year.

Shell’s “LNG Outlook 2019” painted a very bullish picture for us, reporting earlier this year that global LNG demand will reach 384 million tonnes by 2020.

Of course, LNG exports that would tap into strong Asian demand would immediately pop into anyone’s head as the best natural gas investments going forward.

But what if they aren’t?

What if I told you that just ONE country bought more U.S. natural gas than all of our LNG exports combined?

Not only did this premium customer buy up 1.7 trillion cubic feet of U.S. natural gas in 2018, but its thirst for natural gas is climbing at an alarming rate.

And no, I’m NOT talking about China.

Who is this mystery shopper?

Take a look south of the border, and you might be surprised to find that Mexico is buying a staggering amount of our natural gas:

mexico-gas-exports

Now, here’s the catch...

Locking up LNG Profits in 2020

You might think companies are restricted to a certain amount of natural gas they can send to Mexico.

That’s true for the most part, since there’s only so much pipeline capacity that flows into Mexico.

But that may not be the case for much longer.

Right now, the Department of Transportation is weighing the decision to allow companies to transport LNG by rail.

For areas with pipeline constraints — areas, say, like the Permian Basin, where pipeline bottlenecks have become common — this would be a game-changer for the U.S. LNG market.

Think it’s crazy? Well, keep in mind that this won’t be the first time it’s been done.

Truth is, we’ve already tried it out in Alaska.

Back in 2015, Alaska Railroad was granted a two-year permit that would let it ship a dozen LNG cars per train during this pilot project.

Although the final decision won’t come for another few months, approval would be a boon for major rail players.

If Trump green-lights LNG-by-rail, perhaps the biggest winner might just be Union Pacific (NYSE: UNP), one of the largest providers of rail transportation between the U.S. and Mexico.

More importantly, Mexico’s reliance on our natural gas will grow even higher as more of its gas-fired power plants come online.

Now, Trump is about to open up another door for exporters.

Will you be ready?

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.

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