The great Tom Petty once wrote, "The waiting is the hardest part." While fans may claim he was addressing intimate relationships, I know he was really lamenting the time it takes to build a liquefied natural gas export terminal. Apache
But we're buy and hold long-term investors, right? Three years is no big deal! Let's take a look to see if this news makes Apache a consideration for our portfolios.
Apache will operate the plant in conjunction with EOG Resources
Business discussions are under way to lock in customers in the Asian markets, and again, first shipments aren't expected until 2015.
The LNG situation in North America
Right now, there is no facility in North America capable of liquefying natural gas for export, which makes the Kitimat facility incredibly important. Cheniere Energy
Is it worth it?
It only takes a minute to figure out why these companies are willing to put billions of dollars toward building these export facilities. The price of natural gas in North America is $4 per million cubic feet; the price of natural gas in Asia can be as high as $13. Demand in Asia is skyrocketing: China's consumption alone has risen 20% in the last seven years. As fellow fool Dan Dzombak shows, even when you factor in the costs of liquefaction and transport, companies still stand to make a killing exporting natural gas.
Additionally, exporting natural gas would cut the supply available for sale in North America and drive up prices, which currently sit at half of what they were in 2008. This is especially important considering that right now most North American natural gas producers aren't making money on the stuff.
There are existing LNG export terminals across the world that could threaten Kitimat's potential success, most notably those in Qatar and Australia. In fact, more than $200 billion worth of LNG ventures have been proposed in Australia by big oil and gas players like Chevron
Still, Kitimat will likely be investors' best chance to play the LNG export market in North America. Global competition is a risk, but the plant is 1,000 miles closer to Shanghai than Qatar, with access to all of the gas reserves Western Canada has to offer.
It's going to be a three-year race to the finish to see if Apache is able to cash in on Asia's high demand for natural gas. It certainly looks to be the best bet coming out of North America, but whether it can compete with other global powers remains to be seen.
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