“I’m from the government and I’m here to help…”
Two weeks ago, the Biden administration announced an “indefinite pause” on approvals of LNG (liquefied natural gas) export permits.
Environmentalists cheered the news.
The oil and gas industry called the move “stupid.”
But here’s the thing…
The media is making a big deal about the government’s sudden move to limit LNG.
But the truth is that they can’t prevent the massive growth in LNG that’s coming over the next few years.
Natural gas is one of the most widely used fuels in the world. And with the right investments in natural gas infrastructure, you can lock in reliable profits. And here at the Intelligent Income Daily, we’re focused on finding the safest income investments on the market.
Today I’ll show you why the pause on permit approvals won’t stop LNG from soaring in the coming years. I’ll also give you one way to profit from the sector while collecting reliable high yields.
Why LNG Demand Will Continue to Increase
Natural gas is one of the cheapest and cleanest sources of energy. It produces about half the carbon emissions compared to coal when it is burned to produce electricity.
So even as countries switch to renewable energy, they’re still using more and more natural gas to replace dirtier fuels.
There’s just one problem – many countries, particularly in Asia and Europe, don’t have much natural gas.
So they have to import it. And LNG is what makes that possible. When natural gas is cooled to -260° F, it turns into a liquid. And in the process, its volume shrinks by about 600 times. That makes it easy to load it onto a ship and transport it to other countries.
Ever since fracking technology was invented, America has been a country with huge amounts of natural gas.
Right now, natural gas in the U.S. costs about $2.20 per MBtu. The average person uses about 7-9 MBtu of gas every month.
But in Europe, natural gas costs over $11 per MBtu, nearly 5x the price.
That’s why there are huge profits to be made even though it costs a lot of money to ship gas across the ocean.
And it’s the reason companies have spent years getting government approvals and billions of dollars to build the infrastructure needed to make LNG possible.
So while the government can stop approving new LNG permits, it can’t take back the approvals it has already given out.
And those existing approvals are enough to potentially triple America’s LNG export capacity – even after the U.S. became the top LNG exporter in the world last year.
And there are 5 LNG terminals under construction that will add another 9.7 Bcf/d of LNG capacity. That will nearly double the amount of LNG that can be exported over the next three to four years.
Plus, there are another 16.3 Bcf/d of LNG projects that have already received approval but haven’t started construction yet. It’s unlikely all of these will be built, but if they are, that would triple LNG export capacity from what it is today.
On top of all that, most LNG terminals today run at a baseload capacity that is 70%-80% of their peak potential… and well below what their permits allow.
So if needed, they could increase LNG production by 20%-30%.
So even if the government doesn’t approve another LNG terminal, LNG will keep growing throughout this decade.
So how can you profit from this trend regardless of the current administration’s recent pause?
How to Profit From This LNG Trend
One way to benefit from the growth of LNG is to invest in natural gas pipelines.
Before any gas gets loaded onto a ship, it first has to be transported from the oilfield to a refinery where it is processed and cooled into LNG.
The pipeline companies that transport the gas act like tollbooths and get a reliable profit, no matter what the price of natural gas is. That means they have reliable earnings that grow as demand for gas increases.
One quick way to add pipeline companies to your portfolio is through the Global X MLP & Energy Infrastructure ETF (MLPX). This exchange-traded fund owns a collection of the top pipeline companies.
MLPX yields 5.2% and has produced 88% returns over the past three years.
That’s 2.4 times better than the S&P 500.
Demand for LNG is going to keep increasing. Don’t miss out on this trend.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily
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