At this point, it’s no secret that natural gas has become the fuel du jour for a variety of nations looking to power their electricity-generation needs. As the fracking has taken hold in North America and huge deposits of gas are being found in the Middle East and offshore Africa, natural gas’s place in the sun is almost assured.
Overall, the Energy Information Administration (EIA) predicts that global natural gas demand will rise by 64% to reach 185 trillion cubic feet in annual demand by 2040. That’s the most growth of any fuel type out there — except maybe hydroelectric power.
However, that torrid growth in gas demand does pose an interesting dilemma. Not every country wanting to use gas has direct access to supplies and can drill on its on soil. Pipelines make sense, if you’re moving gas between neighbors. But what if you trying to ship natural gas, from say a port in Texas to emerging Singapore?
That takes a certain special kind of tanker ship to handle liquefied natural gas (LNG), and over the long term, the companies that own/operate these specialized ships should profit handsomely as natural gas demand continues to grow.
For investors, now is the time to play the LNG shippers.
Huge Future Growth for LNG Shippers
When it comes to natural gas exports, most of the attention has been squarely focused on the purveyors of new LNG export and liquefaction facilities such as Cheniere Energy (LNG). Natural gas needs to be cooled under pressure at minus-260 degrees and converted to a liquid in order to be transported overseas. That requires some pretty sophisticated (expensive) facilities.
As such, operators of these liquefaction plants can charge a hefty fee to energy producers in order to ship their products. So that focus by investors is certainly warranted. However, these firms are just one step in the puzzle, and most haven’t actually begun exporting any fuel just yet.
Enter the LNG and liquefied petroleum gas (LPG) tanker ships. These ships physically take the compressed gas and move it across the oceans. And as natural gas demand from Asia and Europe continues to grow — at around 10% annually — so will these firms’ bottom lines.