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Cheniere Energy, Inc. (LNG): Is It Too Late for US LNG Exports?

This past May, the Department of Energy granted Freeport LNG (a private company) license to export liquefied natural gas, or LNG, to foreign countries–foreign countries that do not have a free trade agreement with the United States that is. Thus, Freeport joins Cheniere Energy, Inc. (NYSEMKT:LNG) as a LNG exporter. This decision presages more export licenses to be issued to US companies. Given the foreign competition already in place, will it be too late for investors in US natural gas corporations? Not necessarily.

Cheniere Energy, Inc. (NYSEMKT:LNG)

First with a license

Cheniere Energy, Inc. (NYSEMKT:LNG) received the country’s first LNG export license. At its Sabine Pass gas port on coastal Louisiana, Cheniere Energy, Inc. (NYSEMKT:LNG), through its partial interest in Cheniere Energy Partners LP (NYSEMKT:CQP) owns liquefied natural gas tanks with a capacity of 17 billion cubic feet. Unfortunately, they’re empty. These tanks will be part of an export facility due to come online in 2016.

For the past three years, Cheniere Energy, Inc. (NYSEMKT:LNG) posted losses. These losses also grew in magnitude during that time despite a growing list of customers paying annual fixed fees now totaling roughly $2.9 billion. Both Cheniere Energy, Inc. (NYSEMKT:LNG) and Cheniere Energy Partners LP (NYSEMKT:CQP) carry significant debt. While they have signed on a growing list of clients and venture capitalists, they won’t be shipping gas until 2016. A lot can happen in three years.

Called Leviathan for a reason

Off the coast of Israel, several natural gas fields have been discovered with enough gas to make Israel an energy exporter. One field called Leviathan may hold 122 trillion cubic feet of natural gas and 1.7 billion barrels of oil. Another gas field called Tamar went from discovery to production in four years. Not to be outdone, Cyprus holds substantial natural gas fields off its southern coast. Both Israel and Cyprus aim for LNG exports and have the likes of Delek US Holdings, Inc. (NYSE:DK) and Noble Energy, Inc. (NYSE:NBL) helping them out.

When will LNG exports begin? In Israel, gas from the Tamar seems spoken for by domestic customers, but when production from other fields begins in 2016, expect exports to begin. Cyprus hopes for natural gas exports by 2020 after making its first discovery in 2011. Construction of a natural gas export facility should begin in 2016.

Delek US Holdings, Inc. (NYSE:DK) is the Israeli energy company active in Eastern Mediterranean natural gas exploration and development. US investors can buy Delek US Holdings, Inc. (NYSE:DK)’s ADR’s. Delek US Holdings, Inc. (NYSE:DK) and Delek Logistics Partners LP (NYSE:DKL), which are partially owned by Delek Group. These companies operate two refineries, logistics services and retail convenience stores in the US, and are interesting investments in their own right, but have no direct interest in the Israeli gas fields.

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