Alaska Jumps on the LNG Export Wagon

Exporting natural gas is expected to be a big opportunity, and the state of Alaska, no stranger to the energy business, is looking to stake a claim in the burgeoning market.

Jan 22, 2014 at 11:18AM

For the most part, natural gas is a domestic market in the Unites States. In fact, until a few years ago, the country was expected to be a net importer of the fuel. That's changed, and high natural gas prices around the world are enticing investors to build export facilities. The state of Alaska is partnering up with some big industry players, which could give this liquefied natural gas facility (LNG) the political support it needs to get done—fast.

Import/export
One of the natural gas facilities closest to opening for business is Cheniere Energy Partners' (NYSEMKT:CQP) Sabine Pass terminal. When it was first envisioned, however, it was seen as a port for accepting liquefied natural gas from other countries. The domestic natural gas boom quickly changed that and led Cheniere to reverse course.

Although there has been public discussion over limiting the export of natural gas, Cheniere's Sabine Pass looks like it will be among the first to send U.S. natural gas overseas. And while it's losing money as it completes the terminal, the partnership already has customers lined up. The long path Cheniere has traveled to get this port completed, however, shows just how beneficial it would be to have a big backer like a U.S. state behind a project.

The players
So when ExxonMobil (NYSE:XOM), BP (NYSE:BP), ConocoPhillips, and TransCanada (NYSE:TRP) snagged nearly $6 billion from Alaska in exchange for a 25% interest in an LNG export facility, it was a real boost to the project's prospects. In fact, Joe Balash, commissioner of the Alaska Department of Natural Resources, told Bloomberg that the deal, if approved by the state's legislature, would give the terminal a "good shot" at moving forward. That's probably the understatement of the day.

This is great news for ExxonMobil, which bet heavily on the U.S. natural gas business when it bought XTO energy for $40 billion at the turn of the decade. Since that point, however, U.S. natural gas prices have collapsed, leaving CEO Rex Tillerson with little choice but to admit that Exxon was "off a year or two" on its timing. Being able to push natural gas into markets with notably higher prices would help reverse that mistake.

Images

Source: EIA

BP, meanwhile, would just like to get its business growing again after the Gulf of Mexico oil spill that tarnished its image and forced it to shed key assets to pay legal and other costs. And dealing with Alaska is far safer than some of the company's other efforts, like a partnership with Russia that's left BP with a minority stake in state-controlled Rosneft.

That deal could turn out to be a real winner for BP, but Russia's not exactly known for being kind to outsiders—or insiders. In addition to being a U.S. state, Alaska would love to have natural gas help offset the oil declines it's been experiencing. In other words, BP and Exxon picked up a politically powerful and motivated ally.

TransCanada, meanwhile, is both a pipeline specialist and one of the biggest players in Canada's energy market. Since Alaska is separated from the contiguous 48 states by Canada, it's a good idea to have the company aboard. For TransCanada, making friends with Alaska could also be beneficial in getting its stalled Keystone XL pipeline, which is mired in U.S. political red tape, approved.

Everyone wins
In the end, it looks like just about everyone involved in this project could end up a winner if the Alaska legislature approves. Keep an eye on that process, but with the state's oil flow falling it seems like a good bet that everyone's interests are aligned on this one. That said, Exxon or TransCanada are probably better options than BP for getting a piece of the action because of the still lingering issues surrounding BP's Deepwater Horizon oil spill. But if you don't want to wait for this project, take a look at Cheniere—you just won't have Alaska investing along side you.

Another way to profit from surging U.S. natural gas production
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don’t miss out on this timely opportunity; click here to access your report -- it’s absolutely free. 

 

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers