How Can You Benefit from LNG “Enabling the Downstream Market”?

Posted on Sunday, September 20, 2020

I recently read a research note from Morgan Stanley regarding the role of liquefied natural gas (LNG) will play in disrupting the global energy market. One area in which they were particularly bullish was referred to as “downstream enablers.” This is a phrase they coined for companies that regasify LNG to support demand growth in the power and industrial markets of the Caribbean, Latin America, and Southeast Asia.

While I could not agree more with Morgan Stanley’s observation, they completely failed to recognize that there are large downstream markets right here at home in the U.S. that can be enabled, not just the global regions typically thought to have under developed energy infrastructure.

According to a study from the Propane Education and Research Council, the top 10 propane using states consumed 3.5 billion gallons in 2015, most of whom were within 500 miles of the Marcellus and Utica shale regions of the U.S. Not only is regasified LNG consistently more than 20% less than the cost of propane, it is also cleaner, causes less wear and tear on your equipment, and has far less price volatility. Indeed, given the deep liquidity of the natural gas market, LNG price can be hedged for up to three years.

I recently wrote an article about the “Three Ways in which Your Utility can Benefit from LNG”. In that article I discussed how utilities could use LNG for their underserved customers or for the creation of “gas islands” by using Kinetrex’s SRS Virtual Pipeline System. The fact is, even if your utility isn’t willing to extend or expand service in your location, regasified LNG may be just as cheap as if it had.

Within Kinetrex’s market, our average delivered cost of LNG was slightly higher than the average cost of utility supplied natural gas as note by the Energy Information Administration. To be clear we aren’t suggesting that you dump your utility, but if additional utility service isn’t an option, regasified LNG may be the perfect solution.

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