Cheniere Energy: A Look at the Opportunity

Cheniere Energy (LNG) is a smart investment from a long-term point of view. I’m saying this because the company is on the right track to make good use of the opportunity in the end market. Let’s take a look at the reasons why Cheniere Energy is a good investment.

Strong natural gas demand ahead

Gas demand in Asia will benefit from declining prices in the short run. However, the report expects the long-term demand outlook for gas to remain uncertain in Asia. This is because of declining oil prices that enabled few Asian countries to move ahead with plans to expand coal-fired power generation instead of gas-fired generation.

However, if the oil prices get strengthened it will once again lead to higher consumption of LNG in these countries.
Also, it will lead to higher spot LNG prices in the Asian regions that will help Cheniere to gain more market share in these premium Asian as well as European markets.

In fact, Cheniere expects global LNG demand to grow at CAGR of 5.7% to 200 mtpa through 2025. This will lead to average of 21 mtpa of new liquefaction capacity for each year going forward.

Investing in future development

Cheniere has recently started investing in other projects such as hydrocarbon export. It is pursuing related business opportunities in both upstream and downstream of the Sabine Pass LNG terminal. It has started working on it and expects estimated investment opportunity up to $2 billion. These facilities will be able to export up to 1 MMbpd liquid hydrocarbons. It expects these projects to commence in early 2017.

This is perhaps the good decision, as the company can leverage its existing facilities to stretch its hands into other possible upstream and downstream business opportunities. This will allow LNG to remain competitive during times of softness in the gas markets. The chart below illustrates its hydrocarbon export project development blue print.

Conclusion

Cheniere looks well-positioned with its long-term supply agreements and fee-based revenue. Also, it is expanding its upstream and downstream business opportunities that should act as a tailwind for the company in the long run. So, it will be a good idea for investors to buy the stock for the long run.
Published on Oct 24, 2015
By Harsh Singh Chauhan

Copyrighted 2016. Content published with author's permission.

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