Tankers bringing liquefied natural gas, or LNG, to the port of Rotterdam in the Netherlands. Exports of U.S. LNG to Europe and elsewhere are expected to ramp later in the decade.
The invasion of Ukraine—and Europe’s reliance on Russian energy—spotlights the strategic importance of American natural gas.It also opens up another opportunity for U.S. producers, whose stock prices do not adequately reflect the growing global demand for gas.
Even after doubling in price over the past year, natural gas remains cheap in the U.S. compared with the rest of the world—roughly a 10th of what Europe pays. Arun Jayaram, a J.P. Morgan analyst, expects U.S. prices to close part of the gap.
“The U.S. was structurally oversupplied for gas for most of the past eight to nine years,” he says. “With capital discipline and growing export demand, that is changing.”
The U.S. is exporting about 10% of its daily output as liquefied natural gas. More of that LNG is likely to go to Europe as customers there shun Russian gas. In January, U.S. exports of LNG to Europe topped Russian pipeline volumes there for the first time. As new facilities are built, LNG exports from the U.S. are projected to rise by as much as 50% by 2027.
In the U.S., meanwhile, overall gas demand is expected to rise 10% by 2025. according to the U.S. Energy Information Administration. Producers like
EQT (ticker: EQT),
Chesapeake Energy (CHK), and
Coterra Energy (CTRA) stand to benefit. While their stocks have risen…