Your Three Most Pressing Energy Questions – Answered

Given the action that has taken place in the energy sector over the past several months, I haven’t had the opportunity to sit down and answer your many questions.

So let’s do that today.

Your questions have focused mostly on three issues, and I’ve put them all together and answered them.

First, many of you have asked about the status of liquefied natural gas (LNG) exports from the U.S., and how that will impact the global market.

One promising company in particular has drawn your interest…

Q 1: How Will U.S. LNG Exports Affect the Global Market?

Cheniere Energy Inc. (NYSE MKT:LNG) was to have begun exports in the fourth quarter of last year from the Sabine Pass facility on the Gulf of Mexico, but that has now been delayed until the first quarter of 2016. The company has secured five major twenty-year contracts with some of the largest European and Asian LNG importers in the world.

In addition, the U.S. government has approved several other terminals and company export applications. With the acceleration of LNG trade worldwide, U.S. exports are expected to account for 6% or more of total volume before 2020 (from 0 now).

However, it will take some time for LNG sales to establish sufficient hold in some markets. That’s because the initial delivery price will exceed that for natural gas coming via traditional pipeline.

Nonetheless, LNG will be one of the most important changes in the energy sector over the next decade.

This importance comes from the ability to establish spot markets in every location where regular volume is delivered. This ability to trade locally in short-term contracts will undermine the position (and price) of long-term pipeline delivery contracts.

As with just about anything else, increasing trade and guarantee of delivery will lower the export price and improve the predictability of local market transactions. And that will have a primary ripple effect across energy usage in entire economies.