Why the LNG export opportunity is important for Dominion

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Liquefied natural gas (or LNG) benefits

After the shale boom in the U.S., the natural gas supply grew quickly. Transportating natural gas requires a network of pipelines. As a result, it isn’t practical to deliver natural gas over very long distances. LNG consumes less than 1/600th of the volume as natural gas. It can be transported in tankers on ships across the world.

Cove

Opportunity for U.S. companies

Energy demand is rising in many Asian countries. Not only is natural gas inexpensive, it’s also one of the cleanest energy sources. This creates a huge opportunity for U.S. companies to export natural gas, in the form of LNG, to overseas markets.

According to the International Energy Agency’s (or IEA) projections, by 2019 the U.S. will become the third largest LNG exporter in the world—after Qatar and Australia.

Cove Point terminal

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Dominion will invest $3.8 billion to build infrastructure for natural gas liquefaction and export facilities. LNG exports will be a major differentiator for Dominion (D) among its peers. LNG will drive its revenue significantly in the future. The facility’s capacity is 5.25 million tons per year. The terminal’s exports are slated to begin by June 2017.

The Cove Point terminal is the first LNG export facility outside Texas and Louisiana to get clearances from the government. As a result of this monopoly, Dominion will have superior bargaining power with suppliers.

Dominion has already signed 20-year contracts with India’s Gail India and Japan’s Sumitomo Corporation to supply LNG. These long-term contracts ensure steady revenues for the company. Within the Utilities Select Sector SPDR (XLU), Dominion is the only company that has approval to export LNG.

Other LNG projects with export approvals

The Sabine Pass and Cameron Terminal are owned by Cheniere Energy (LNG) and Sempra Energy (SRE). They’ve been approved by government agencies to export LNG. Through its group companies, Kinder Morgan (KMI) filed an application with regulators to approve LNG exports for one of its facilities in Georgia.

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