Chris’ note: Energy markets are in turmoil. Russia’s invasion of Ukraine has forced Europe to wean itself off Russian natural gas… In China, dams for hydropower have dried up… And energy import costs are rising.
This has caused crippling power outages.
That’s bad news for Europe and China. But according to friend of Legacy Research and income investing expert Brad Thomas, it’s a boon for U.S. energy exporters. And as he shows today, there’s a way to play it that pays an 8.7% yield.
It’s part of the America Reborn theme I’ve been spotlighting this week. Not only are manufacturing jobs coming home as the country reindustrializes… but it’s all happening while American energy producers are scaling new heights.
The economic boom that’s coming as a result will take most investors by surprise. But by acting on Brad’s recommendation, you can position yourself to profit before it really takes off.
William Wood Prince was furious…
It was 1951. And his local natural gas supplier had notified the Chicago tycoon of another price increase.
Prince ran a sprawling empire of slaughterhouses and livestock yards across the city. And rising gas bills cut into his margins.
Prince knew natural gas was dirt cheap down in Louisiana. If only there was a way to ship the volatile fuel up the Mississippi…
So, he teamed up with the Continental Oil Company to explore the idea.
It wouldn’t be easy. You have to cool natural gas to -260°F before you can turn it into a liquid you can ship.
After running the numbers, Prince was dismayed to find that shipping gas to Chicago wouldn’t be worth it.
But it could lead to a lucrative new business…
Across the ocean, natural gas prices in Britain were sky high. After the Great Smog of London in 1952, the country had passed laws to clean up air pollution. Natural gas was the fuel of choice to replace dirty coal.
So shipping cheap gas from the Gulf Coast across the Atlantic could be profitable.
Prince and Continental Oil decided to convert the Nomarti – a World War II-era cargo ship – into the first liquefied natural gas (“LNG”) carrier.
Engineers had to line the hull with 12 inches of balsa wood. It was the only material capable of holding the weight of the gas while keeping it cool.
The Methane Pioneer, the world’s first LNG carrier (Source: SIGTTO/GIIGNL)
The newly christened Methane Pioneer made its first shipment in 1959. It brought 5,000 cubic meters – about two Olympic swimming pools – of LNG to Britain.
Now, almost 65 years later, more than 500 billion cubic meters of LNG are shipped every year.
And demand is only going to rise.
That means rising profits for folks who invest in this growing energy sector. But as you’ll see today, the best way to play it isn’t LNG shipping companies.
It’s in another kind of company crucial to the shipping and storing process.
China’s LNG Shopping Spree
Like Britain in the 1950s, China is on a natural gas shopping spree.
Thanks to the rising cost of imported coal… and megadroughts that have affected hydropower stations… China has been suffering from rolling power outages.
And the government there sees LNG as a way to ensure a steady supply of energy at reasonable prices.
One of the country’s largest private energy companies just signed a 20-year deal to buy gas from the U.S. And other state-owned energy companies are in discussions for more natural gas deals.
In fact, China is set to become the world’s largest importer of LNG this year.
And according to the consulting company Rystad Energy, China’s LNG imports could double over the next decade.
India and European nations are also looking for LNG deals to avoid future energy shortages and reduce the use of coal.
That’s good news for America, the world’s biggest LNG exporter.
150% Rise in Demand
According to the Energy Information Administration, the energy industry watchdog, LNG exports are projected to increase by 150% over the next decade.
Now after reading this, you may think investing in LNG shipping companies would be a good idea.
But their earnings depend on commodity prices and shipping rates. And these can change rapidly.
Instead, a better way to benefit from the growth of LNG is to invest in natural gas pipelines.
Introducing Midstream Limited Partnerships
Before any gas gets loaded onto a ship, it must first be transported from the oilfield to a refinery. This is where it’s processed and cooled into LNG.
And it’s where pipeline companies – also known as midstream limited partnerships (“MLPs”) – come in.
They transport the gas and get a steady profit for every cubic meter they deliver – no matter what the price of natural gas is.
That means they have reliable earnings that grow as demand for gas increases.
One easy way to add pipeline companies to your portfolio is through the Alerian MLP ETF (AMLP). This exchange-traded fund (“ETF”) holds a basket of master MLPs that yield 8.7%.
With LNG demand set to more than double over the next decade, now is a great time to take advantage of this opportunity.
And if you want to make even more of a profit from this trend, you can find out the names of my favorite MLP recommendations here.
Either way, don’t be late to the game and miss out on the early innings of this LNG trend.
As global demand grows, so do the profits up for grabs.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily