As energy traders focus on Iran sanctions, the recent rally in crude oil and how to make money in this market, we're looking at another part of the industry focused on liquefied natural gas (LNG). In this case, the growing presence of international companies in the U.S., such as Qatar Petroleum, who is close to make a final investment decision on its Golden Pass LNG terminal in the next few months. Let's dig in it to find some money-making ideas.
The Golden Pass LNG Terminal near Sabine Pass, Texas, is a joint venture formed by affiliates of three of the world's largest and most experienced oil and gas companies. Qatar Petroleum has a 70% ownership stake, ExxonMobil (XOM) has 17.6% and ConocoPhillips (COP) shares 12.4%. It is among the largest terminals in the world capable of importing approximately 2 billion cubic feet of natural gas per day (Bcf/d) through its dual berth ship docks.
According to reports, Qatar Petroleum's chief executive, Saad al-Kaabi, has said that "depending on the project's cost and feasibility" he expects to make a final investment decision on the Golden Pass facility in the next few months -- very positive news for the U.S. LNG industry and natural gas upstream providers. Bloomberg had reported in late June that this decision would come in early 2019, and we think that the current geopolitical environment has pushed Qatar to accelerate this decision.
The final go-ahead will come only after Qatar secures the necessary gas to feed the project. The company could buy it on the spot market in Texas or Louisiana. But Qatar is not in the business of infrastructure and they will link it to an upstream business that they'll buy in the U.S., thus creating a natural hedge. This is a similar model to what Tellurian (TELL) is looking to build. TELL is the only publicly traded LNG company in the U.S. developing this concept.
Qatar's strategy is to expand its upstream business and complement it with related downstream projects to the tune of a $20 billion investment, as well as additional $5 billion in one-off deals in the petrochemicals industry. We think a company that is a smaller version of LyondellBasel would fit in perfectly in Qatar's portfolio.
But how do you spend $20 billion buying an upstream business? You could buy Cheseapeake Energy (CHK) for $4 billion, Range Resources (RRC) for another $4 billion, or Southwestern Energy (SWN) for another $3 billion. All three are levered to the U.S. onshore natural gas market.
To maintain its dominance in the U.S. and Australia, Qatar Petroleum is actively expanding overseas through joint ventures with international companies, just like at Golden Pass. Qatar Petroleum is likely to partner up with one of its existing ones operating in Qatar, some of these companies include ExxonMobil, Total (TOT) and Royal Dutch Shell (RDS.A) .
Qatar is currently in a stand-off boycott with its neighbors in the Middle East (e.g. Saudi Arabia, the United Arab Emirates, Bahrain and Egypt) which sparked in early June on geopolitical issues. These countries cut diplomatic, economic and transportation links with Qatar due to accusations of backing terrorist organizations, and that's why the kingdom is actively broadening its investments outside the Middle East.
Qatar is one of the Organization of the Petroleum Exporting Countries' (OPEC) smallest producers so it doesn't have much weight in the crude oil markets. However it is one of the most influential players in the global LNG market due to its annual production of 77 million tonnes and that's why we're paying attention to their U.S. moves.
