The Motley Fool Previous Page

1 Easy Way to Ride the LNG Boom

Joshua Bondy
July 23, 2014

LNG shippers are an easy way to participate in the global rush for flexible and emission-lite energy. Now that China is trying to move away from coal, LNG is an even more attractive fuel. Teekay LNG Partners (NYSE: TGP) is a great company to check out with its stable and diversified growth. 

The new Arctic game
Teekay LNG Partners has signed onto the Yamal LNG project in Northern Russia with six icebreaker LNG vessels. The backers Total, China National Petroleum Corp and Novatek are all well-known names. Thanks to Yamal Teekay LNG Partners is increasing its market share in a niche LNG market while enjoying dependable 25 to 27 year fixed charter contracts.

The LNG vessel market is expected to be oversupplied in 2014 and 2015, but nine of the new vessels Teekay LNG will receive between 2014 and 2016 five have already been contracted to Cheniere Energy and Statoil.

Towards the end of this decade things are expected to improve. In 2017 Yamal's first LNG train is expected to start-up while the market for LNG vessels falls into a deficit. The good news is that the majority of Teekay's LNG and LPG vessels are on long-term contracts that are expected to expire in 2020 or later, leaving limited exposure to short-term issues.

Not all LNG shippers are the same 
Golar LNG Limited (NASDAQ: GLNG) is in a different situation. It has nine newbuilds that are going to hit the market in the next couple years. Eight of these ships will join four of its existing vessels on the spot market. Given the short-term supply challenges, Golar LNG Limited has a rough couple years ahead.

It also has a number of older vessels. Golar LNG Limited is considering converting three of its older vessels into floating storage and regasification (FSRU) unit. The company needs