It’s no secret that North America is now awash in abundant natural gas production. As energy firms like Fort Worth, Texas-based Range Resources Corp. (NYSE:RRC)- have adopted fracking and other advanced drilling methods in spades, the amount of natural gas being produced in the U.S. and Canada is staggering. And while domestic demand is growing, we still are producing perhaps more than we need.

Which poses an interesting question- what to do with the excess?

While there have been efforts made to increase domestic demand, the idea of exporting our excess has gained significant steam over the last few years. For investors, the opportunity in shipping our natural gas production around the world could be one of the biggest pays over the next decade.

Rising Global Demand For LNG

It was just a few years ago that the United States was forced to import natural gas. However, with the adoption of hydraulic fracking, the tables have turned and North America is poised to be one of the leaders in liquefied natural gas (LNG) exports. At its core, LNG is essentially natural gas that is cooled under pressure and converted into a liquid in order to be transported by tanker ships to markets not connected by pipelines. The fuel is then converted back into a gas at various import terminals.

And demand for LNG is growing like weeds.

According to analysts at consultancy Ernst & Young, since 2000, global LNG demand has risen by an estimated 7.6% per year. That torrid rate is nearly 3 times faster than overall domestically produced/consumed natural gas demand. The future seems rosy as well. E&Y predicts that overall global LNG demand by 2030 will be double 2012’s numbers of 250 million metric tons.

The key driver for that demand will be energy hungry Asia. Nations like Japan, South Korea and Taiwan continue to use LNG in spades as they look for ways to power their advanced economies. At the same time, both China and India are expected to be the largest growth markets for LNG. China alone is expected to nearly triple its demand for liquefied natural gas by 2020. Adding in Southeast Asian nations like Malaysia, Indonesia and Thailand- which are all set to become importers by 2017- and you have a robust demand situation. All in all, analysts predict that Asia will account for more than 80% of all LNG exports.

This rising demand, along with higher prices for the fuel, have encouraged a whole host of firms including utilities Dominion Resources Inc. (NYSE:D) of Richmond, Va. and San Diego's Sempra Energy (NYSE:SRE) to begin the process of building liquefaction plants here in North America in order to export LNG to Asia.

Playing Rising Exports

Given Asia's voracious demand for the fuel, LNG will remain a top draw for those firms providing to the continent. While not all the projects will be built, investors should consider adding some of the major players to a portfolio in order to profit from the trend.

Leading the way could be Houston-based Cheniere Energy (NYSE:LNG). Cheniere is the only company that has been approved across the board by U.S. regulators to begin exporting natural gas from its Sabine Pass facility on the Gulf Coast. That fact vaults LNG into the pole position as leader in exports. Cheniere continues to rack up big multi-year contracts with European and Asian utilities- like Spain’s Endesa Generacion and Indonesia’s PT Pertamina. For those investors looking to extract a bit of yield out of Cheniere, the firm has set-up a master limited partnership subsidiary- Cheniere Energy Partners LP (NYSE:CQP)- as well as a publicly graded general partner (GP) as Cheniere Energy Partners LP Holdings, LLC (NYSE:CQH).

In order to make LNG exports/imports a reality, it’s going to cost serious money to make it happen- billions of dollars. Leading the way in contorting these facilities are engineering firms like The Hague, Netherlands-based Chicago Bridge & Iron (NYSE:CBI) and Baar, Switzerland’s Foster Wheeler AG (Nasdaq:FWLT). The duo represent the two key infrastructure firms that are responsible for the bulk of current and new LNG capacity coming online in the years ahead. Backlogs continue to rise at CBI & FWLT as do share prices.

Finally, LNG exists because there are no pipelines that cross the ocean. That means the firm that specialize in shipping it should benefit long term. Hamilton, Bermuda-based Golar LNG (Nasdaq:GLNG) has been in operation for more than 30 years and features 13 different LNG vessels. However, given the demand profile, GLNG is planning on adding nearly 11 ships over the next few years. Likewise, newer firms have taken to the LNG market for shipping. Athens-based shipping firms Dynagas LNG Partners LP (Nasdaq:DLNG) and StealthGas (Nasdaq:GASS) both offer the opportunity to pay younger and smaller fleet sizes.

The Bottom Line

As we continue to unearth a record amount of shale gas, exporting that bounty is quickly taking shape- especially to energy-thirsty Asia. For investors, playing growing LNG exports could be one of the biggest opportunities in the oil & gas sector. The previous picks- along with LNG shipper Teekay LNG Partners (NYSE:TGP) –make ideal selections to play the trend.

Related Articles
  1. Fundamental Analysis

    A Natural Gas Primer

    Learn why natural gas is playing a larger role in the energy industry.
  2. Forex Education

    Natural Gas Industry: An Investment Guide

    Investors looking into this industry are faced with a confusing amount of information. We explain the important concepts and terms.
  3. Stock Analysis

    The Top 10 Small-Cap Stocks for 2016 (ATI, ARCB)

    Discover the top 10 small-cap stocks expected to grow in 2016, complete with summaries and growth outlooks for each company and its expected price target.
  4. Fundamental Analysis

    Performance Review: Commodities in 2015

    Learn how commodities took a big hit in 2015 with a huge variance in performances. Discover how the major commodities performed over the year.
  5. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  6. Stock Analysis

    The Biggest Risks of Investing in SandRidge Stock

    Learn about the significant risks of investing in SandRidge. Read how the company may not be able to service its substantial debt load.
  7. Stock Analysis

    The Top 4 Dividend Paying Natural Gas Stocks for 2016 (NGG, SGI)

    Learn about the top four dividend-paying natural gas-related stocks and why their stock prices and dividends may be poised to rise in 2016.
  8. Investing News

    Can Europe Break Its Russian Gas Dependence?

    The EU seems hopelessly addicted to Russian natural gas. If 2015 is any guide, reduction looks impossible because the EU actually increased consumption.
  9. Stock Analysis

    The Top 4 Small Cap Natural Gas Stocks for 2016 (ATW, SGU)

    Explore detailed analyses of the top four small-cap natural gas stocks, and learn about their characteristics and why they are poised to rise in 2016.
  10. Investing Basics

    Understanding How Oil Companies Pay Taxes

    Read about how big oil corporations pay taxes, and learn about tax exemptions and the option to defer. Discover the argument about big oil being given tax exemptions
RELATED FAQS
  1. To what extent do seasonal factors influence the utilities sector?

    Seasonal factors have a large impact on the utilities sector, with a significant increase in demand during the summer and ... Read Full Answer >>
  2. How do the average costs compare for the different types of oil drilling rigs?

    Average costs vary widely between different types of oil rigs, starting at around $20 million and ranging as high as close ... Read Full Answer >>
  3. How does an oil and gas company measure and state its production?

    Measuring Oil and Gas Production Oil and gas exploration and production companies, or E&P companies, use three basic ... Read Full Answer >>
  4. What credit rating should I look for in an oil and gas company?

    Look for a credit rating in an oil and gas company that is suitable for your desired returns and risk tolerance level. Companies ... Read Full Answer >>
  5. What debt level should I look for when investing in an oil and gas company?

    Investors should look for debt level in an oil and gas company that is appropriate for their risk tolerance. In a bull market ... Read Full Answer >>
  6. What factors are the primary drivers of share prices in the oil and gas sector?

    The primary drivers of share prices in the oil and gas sector are energy prices and economic growth. Stock prices in the ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center