LNG exports
One of the most hotly contested future demand drivers is LNG exports. Currently, just Cheniere Energy, Inc. (NYSEMKT:LNG) is approved to export gas to countries that are not free trade agreement members. However, many companies would like to join Cheniere Energy, Inc. (NYSEMKT:LNG) in this very lucrative market. In fact, there are currently plans for up to 30 Bcfd of additional export terminals. However, it’s very unlikely that all will be built given that the global LNG market is currently just 30 Bcfd. Enterprise sees a sustainable market potential that’s probably limited to 4 Bcfd-6 Bcfd, maybe as high as 8 Bcfd.
At the investor day, the company addressed this often misunderstood debate head on. The key sticking point is the concern that unchecked exports will drive the price of natural gas much higher. Enterprise Vice President Tony Chovanec made it clear to point out: “If I haven’t done anything else so far today I hope I’ve convinced you that the resource is plentiful and can it be produced very, very efficiently.” He went on to say, “[Make] no mistake about it, at Enterprise Products Partners L.P. (NYSE:EPD) we believe that exports in free markets are important to balance those markets but more importantly, we believe that exports are important to keep the supplies coming.” The bottom line here as far as Enterprise is concerned is that we have more than enough gas to export while keeping prices reasonable even with all the demand drivers we’ve seen thus far.
Residential and commercial conversion
A final, and smaller, driver of future natural gas demand is the conversion of homes and businesses from fuel oil to natural gas for heating in the winter. What was once the one area that drove the price of natural gas, won’t be as big a driver going forward. As it stands, Enterprise sees just 0.5 Bcfd-1.5 Bcfd of incremental demand from these sources.
The Foolish bottom Line
While natural gas isn’t a favorite fuel of producers these days, Enterprise Products Partners L.P. (NYSE:EPD) sees a big future for the commodity. Its view is that if there’s a market, producers will produce, which is why it believes that we’ll see a reasonable amount of natural gas exports in the future. Overall, the company sees a bright future in transporting gas and liquids, especially along the Gulf Coast which will see more than half of the overall demand growth.
The article Where Will Future Natural Gas Demand Come From? originally appeared on Fool.com and is written by Matt DiLallo.
Motley Fool contributor Matt DiLallo owns shares of Enterprise Products Partners L.P. and Westport Innovations. The Motley Fool recommends Enterprise Products Partners L.P. and Westport Innovations. The Motley Fool owns shares of Westport Innovations.
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