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LNG Stocks That Have Risen Up to 91% in 2011

BOSTON ( TheStreet) -- The nuclear disaster in Japan has piqued interest in how the Asian country's energy needs will be met given the loss of capacity.

As a result, those concerns have helped spark a boom in demand for liquefied natural gas (LNG), a cheap, plentiful, environmentally friendly, multi-purpose fuel.

And separately, the near-record prices for crude oil have only added to its appeal, as well as that of the services of the unique tanker ships that deliver LNG from producer to the consumer country.

LNG is natural gas that has been cooled into liquid form for shipping, the most efficient means of transporting it other than via dedicated pipelines. Many tanker companies lease their vessels on long-term contracts, so few are available for "spot," or short-term lease.

"The tanker market is so tight right now that anybody with viable tankers is going to be making a killing," said Steve Johnson, president of Waterborne Energy, a Houston firm that tracks oil and LNG shipping, in an interview Wednesday. "There are no -- zero -- tankers available."

"Spot charter," or short-term, rates on LNG ships have risen to about $90,000 a day from $20,000 a day not long ago, he said, and $100,000 a day isn't far off.

DnB NOR Markets, the financial-advisory arm of Norway's DnB NOR Bank, which is one of the world's foremost shipping industry banks and a major international player in the energy sector, said in a new research note that "we are very positive on the short- and long-term prospects for LNG shipping. The combination of limited fleet growth and strong transportation demand should keep rate levels at highly profitable levels over the coming few years."

Johnson said Japan's immediate needs aren't expected to cause a spike in demand for LNG as his firm's analysts expect the 100 to 120 monthly LNG ship visits it was seeing prior to the March 11 earthquake and tsunami should rise by only five to nine vessels per month to meet the current demand. "So it doesn't have the big global impact that some people believe."

Demand growth in Japan, currently the world's largest importer of LNG, is expected to remain steady at 2% per year, but could rise as its economy recovers from its nuclear disaster. The scenario could be much different if Japan decides to back away from nuclear and replace it completely as an energy source with natural gas.

Johnson said most of Japan's supply needs are being met regionally, from Australia, Indonesia and Russia, so supply isn't an issue now.

LNG will be a cheap and plentiful resource for years, because the nation of Qatar flooded the LNG market with new product last year after it completed new processing facilities that have given it command of the world's LNG market. And the U.S. is producing more than it needs due to its expansion of oil share projects.

The amount produced in 2010 was at the highest level in almost 40 years. "Global production of LNG has grown 30% in the past three years and demand is huge across Europe and Asia," where it's used for household cooking and heating, in public transit vehicles and in electricity generation, Johnson said.

Shares of many of the firms in this niche have skyrocketed on speculation that they can name their price when they renew their typical, multi-year contracts with LNG suppliers.

The Standard & Poor's 500 Index is up 6.5% this year and 14.5% over the past 12 months. Here are four stocks of companies seen benefiting from the rising demand for LNG, and how their shares and businesses are performing:

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SYM TRADE IT LAST %CHG
GLNG $30.70 -1.00%
LNG $79.36 -1.60%
TGP $36.85 -0.54%
BRGYY $14.66 -0.54%
FB $79.41 0.56%

Markets

DOW 18,248.31 +115.61 0.64%
S&P 500 2,112.86 +8.36 0.40%
NASDAQ 4,991.8110 +28.2840 0.57%

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