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Will LNG Exports Work in the Long Term?

Sunday - 6/23/2013, 3:30am  ET

There is an immense opportunity in the global LNG market because of huge arbitrage opportunity in natural gas prices in various locations around the world. One example is the price difference between the U.S. and Europe, where Henry Hub spot prices are almost $10 below spot prices in Europe. Although this does present a huge opportunity, the competition for LNG exports worldwide is about to get much stiffer. 

According to Wolfgang Moehler at IHS, global demand for LNG will grow to around 60 million to 80 million tons per year by 2020. While this may seem like a big market to fill, it's much smaller than the total capacity of proposed LNG export facilities. Proposed facilities in the U.S. alone far outpace anticipated global demand, and other LNG export regions such as Australia, sub-Saharan Africa, and Canada all want a piece of the pie as well. 

Still, there are a few advantages the U.S. has in the race to capture LNG market share. We are the only country that is producing shale gas in commercial amounts, and a few companies have already started construction on export terminals. Cheniere Energy will become the first LNG exporter approved to ship to countries that aren't members of a free trade agreement. With contracts for its first two LNG trains locked in for the next 20 years, Cheniere is primed for solid gains once the initial LNG trains start chugging in the first half of 2015. Be sure to read all the details in this premium research report.

In the following video, Fool.com contributor Tyler Crowe joins Joel South and Taylor Muckerman in the studio to discuss some of the emerging trends in the LNG export game both in the U.S. and abroad.