Please ensure Javascript is enabled for purposes of website accessibility

Alaska Jumps on the LNG Export Wagon

By Reuben Gregg Brewer - Jan 22, 2014 at 11:18AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

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.

One of the natural gas facilities closest to opening for business is Cheniere Energy Partners' (CQP -1.35%) 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 (XOM 1.45%), BP (BP 1.06%), ConocoPhillips, and TransCanada (TRP -3.78%) 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.

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.


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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Exxon Mobil Corporation Stock Quote
Exxon Mobil Corporation
$88.45 (1.45%) $1.26
TC Energy Corporation Stock Quote
TC Energy Corporation
$49.09 (-3.78%) $-1.93
BP p.l.c. Stock Quote
BP p.l.c.
$29.66 (1.06%) $0.31
Cheniere Energy Partners, L.P. Stock Quote
Cheniere Energy Partners, L.P.
$45.86 (-1.35%) $0.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.