The energy industry landscape has changed dramatically over the past few months. Russia's invasion of Ukraine has made energy security a priority for a growing number of countries. That's driving increased interest in liquified natural gas (LNG), which can provide energy security at a lower emissions profile than oil and coal.
LNG requires a significant infrastructure investment. The energy industry needs to build more pipeline capacity to transport natural gas to new liquefaction and export terminals. Two leaders in developing natural gas infrastructure are Energy Transfer (ET) and Kinder Morgan (KMI -0.12%). That makes them ideal ways to play in the upcoming LNG investment wave over the next decade.
Patience is paying off
Energy Transfer has been trying to build an LNG export terminal in Lake Charles, Louisiana, for years. That perseverance is about to pay off. This year, the master limited partnership has signed several LNG sales agreements, putting it closer to getting enough contracts to justify the investment. The company is negotiating with other LNG buyers and potential investors in the project. It is confident that it will make a final investment decision on Lake Charles LNG by year-end, putting it on track to finally start producing LNG by 2026.
In addition to that, Energy Transfer is working on several natural gas pipeline projects to support LNG exports. It's currently building the Gulf Run Pipeline to move gas to the Golden Pass LNG project, which it should finish by year-end. It could expand that pipeline in the future to support incremental demand. Meanwhile, Energy Transfer is looking to build a new Permian natural gas pipeline. It expects to construct the pipeline along an existing route, which would enable it to complete the project quickly and at a lower cost than competing ones.
Meanwhile, given its vast natural gas infrastructure network, it should have ample opportunities to expand in the future to support higher natural gas production in the U.S. and increased LNG demand.
Opportunities are starting to emerge
Kinder Morgan operates one of the country's largest natural gas infrastructure systems. It currently moves about 40% of U.S. gas consumption and exports. That vast natural gas network has put it in a prime position to capitalize on growing gas demand.
The Russian invasion of Ukraine is fueling more interest in natural gas, opening the door for Kinder Morgan to explore some new expansion projects. The company is currently holding open seasons to gauge customer interest for expansions of two of its Permian Basin natural gas pipelines. It already has an anchor shipper that agreed to take half the capacity of one of the pipeline expansions. If it receives enough customer support, it could complete these expansions by the end of next year. In addition, Kinder Morgan believes that the region will need a third large-scale gas pipeline by 2026. That could enable it to finally move forward on its proposed Permian Pass project.
Meanwhile, the company said that it's starting to explore the potential of completing a small-scale expansion of its Elba Island LNG export facility in Georgia. It discussed that project a few years ago but didn't move forward at the time. However, given the current geopolitical climate in Europe, it's starting to make sense to consider that project again.
An emerging gas infrastructure building boom
In recent years, volatility in the oil and gas market has slowed demand for new natural gas infrastructure. However, with prices soaring over the past year, fueled by Russia's invasion of Ukraine, interest is heating up because LNG could help countries improve their energy security. That could drive a boom in gas-related infrastructure investment over the next decade, which would help power growth for industry leaders like Kinder Morgan and Energy Transfer. That makes them great infrastructure stocks to consider buying and holding for the coming LNG wave.