U.S. Export: The Future of LNG
How You Should Invest in Liquefied Natural Gas Exports
Five years ago, a package was mailed from the 31st floor of a Fifth Avenue skyscraper in New York City.
It took less than a day to reach its destination on Independence Avenue in Washington, D.C., where it was promptly stamped and filed in the Docket Room of the Office of Fossil Energy. It was only the first of dozens of such packages John Anderson would receive over the next three years.
The purpose of the bulky package sent on August 11, 2010 was clear from the first line of the cover letter, which read:
Enclosed for filing on behalf of Sabine Pass Liquefaction, LLC (“Sabine Pass”), please find an original and fifteen (15) copies of Sabine Pass's application for long-term, multi-contract authorization to engage in exports of up to 16 million metric tons per annum (“mtpa”) of liquefied natural gas (“LNG”), for a 30-year period.
This was the first application received by the Department of Energy for permission to export domestically produced LNG from the Lower 48.
Just four weeks later, the application was approved.
So much for governmental red tape...
The Future of LNG Exports
Now, it really didn't take long for the next application to hit John Anderson's desk. It arrived a few months later in December — this time an LNG export application filed on behalf of Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC.
This time, it took less than two months for the Department of Energy to give the green light.
Since those two applications were filed back in 2010, dozens of similar applications were mailed to the Office of Fossil Energy, each with a similar agenda.
And slowly but surely, the Department of Energy (DOE) has been quietly approving more and more of these long-term applications.
In fact, the DOE has received 97 FTA and non-FTA applications since John Anderson received that first package back in 2010 — totaling approximately 89.72 Bcf/d! You can see the entire list for yourself right here.
Unfortunately, there's one serious catch in this situation... Many of these export applications are restricted to nations with which the United States has a free trade agreement.
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Granted, the DOE has so far approved 49 of those FTA applications (two have been vacated, and one has been withdrawn), but as you and I are both well aware, the Asian LNG spot market is the Holy Grail for LNG exporters.
Yet most of these nations do not have free trade agreements with the United States.
And the DOE is a little more cautious in this matter, having only approved 13 of the 45 non-FTA applications, with 28 still under review.
The only good news here is that we have one with South Korea, which happens to be the world's second-largest buyer of LNG.
Still, in order to export LNG to countries like China or Japan — or even to rescue the Ukraine from Putin's evil clutches — these companies have to submit a non-FTA application to export domestically produced LNG.
This, dear reader, is where the government is dragging its feet.
Let's be clear: Rather than taking weeks, these non-FTA approvals can take up to several years.
So it's a good thing these future LNG exporters have access to a massive, cheap supply of natural gas, entirely thanks to the ongoing shale gas boom in the Lower 48.
Let's play the optimist for a moment and imagine the Department of Energy suddenly approves all of these applications tomorrow, and these companies start exporting as much LNG as they're allowed to non-FTA nations.
Believe me, there's a sweeter spot for natural gas profits than simply placing your bets on which shale gas stocks will survive the current supply glut.
You see, building these LNG terminals can take years, costing billions of dollars apiece.
In fact, North American LNG export profits are actually easier to find than you might first think. A few of these LNG exporters have had plans in the works since Day 1.
Until next time,
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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