LNG Investing in the Next 10 Years

“Right now we have one of the largest LNG facilities in the world being built in Louisiana… in the next 3-4 years there are not enough gas ships in the world that can accommodate that growth.”

U.S. Coast Guard Commandant Paul Zukunft said this recently, as he commented on the dangers presented by the growing liquefied natural gas market.

Chief among these dangers, according to Zukunft, is that the new plants coming online in the U.S. — which include Sempra Energy’s (NYSE: SRE) Cameron LNG plant (the one he references in the quote) and Cheniere Energy’s (NYSE: LNG) Sabine Pass — won’t have enough tanker ships to support production.

Because of an oversupply, shipbuilders haven’t continued building LNG ships. This means the vast amount of LNG set for production in the next few years may find a bottleneck when it comes time for shipment.

Zukunft estimates that the U.S., with approved and proposed terminals, will hold 20% of the world’s LNG capacity, so the fact that there aren’t enough ships presents a daunting challenge for LNG producers like Cheniere.

Of course, there’s still time. Cheniere’s Sabine Pass Terminal won’t begin shipments until the end of this year, while Sempra Energy’s Cameron Plant won’t ship LNG until 2018 at the earliest.

Plus, all of the other major LNG projects are many years away from completion, so it won’t take too long to revitalize the fleet of tankers willing to ship the gas.

And even if there’s a bottleneck on shipments, it won’t matter for investors who take heed now…

LNG Demand is Going Through the Roof

Between now and 2025, demand for liquefied natural gas in Asia and Europe stands to send investments in LNG and its feedstock — natural gas — soaring.

When you take into account all of the LNG proposals on the table that, if approved, would start planning and construction by 2017, there will still be a huge shortfall.

That shortfall is projected to be somewhere around 67.6 million tons per year.

via LNG Investing in the Next 10 Years.

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