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The Future of Energy Investing: Where to Invest in 2023 and Beyond

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Global Trade Daily

The Future of Energy Investing: Where to Invest in 2023 and Beyond

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Let’s make this clear right from the outset: The future of energy investing is in renewable, clean, and green energy. Renewable energy is projected to grow steadily over the next 3 decades, accounting for at least 50% of global energy production/consumption by 2050. Solar power, in particular, will be big over the coming years according to the US Energy Information Administration.

Shifting from the dirty fossil fuels that dominate today’s energy market to a renewable energy future will require a huge investment. Top energy companies around the world have already taken note of this and are putting their money into clean energy. Shell, for example, has pumped more than $2 billion into renewable energy over the last 5 years. A recent study by Octopus, an alternative-investment manager, shows that pension funds and other institutional investors are betting on renewables as the best investment route to go. These institutional investors are projected to invest in excess of $700 billion in renewables over the next decade.

Why invest in clean energy? Because it is ethical and lucrative. You will be helping the world combat the negative effects of climate change and at the same time enjoying a solid return on investment (ROI). Here are 3 lucrative and ethical clean energy investment routes you can take in 2023 and beyond:

1.  LNG

Liquefied natural gas (LNG) is touted by many energy experts as the transition fuel that will bridge the gap between dirty fossil fuels and clean, renewable energy. It’s easy to see why LNG is the perfect transition fuel. First, there are massive reserves of natural gas around the world. Each continent has enough natural gas to last more than 100 years at current rates of production. Secondly, LNG is the cleanest fossil fuel available today. Compared to other energy sources such as diesel, oil, and coal, LNG has negligible greenhouse gases, soot, and particulate emissions. It is, indeed, ethical to invest in LNG.

Besides being an ethical investment, LNG is also quite lucrative considering that its market has full support from governments around the world. Governments are committed to the long-term viability of a sustainable and responsible energy sector, and LNG promotion and adoption are right at the heart of that commitment. Investing in the LNG sector gives you access to incentives, international market insights, subsidies, and other valuable resources from governments.

Investing in LNG presents you with endless business opportunities throughout the natural gas value chain. These opportunities include upstream exploration, natural gas liquefaction at the source, shipping, regasification, pipeline infrastructure, LNG terminals, and city gas distribution (CGD) networks. You can put your money anywhere within that value chain and make a decent ROI. The LNG sector also presents you with a chance to have a positive impact on local communities, especially the underserved, unserved, and the forgotten. You get to provide employment opportunities to local communities, on top of providing them with affordable clean fuel for both domestic and industrial use. 

Many companies are betting their money on LNG. Atlantic, Gulf & Pacific International Holdings (AG&P), for example, has made huge investments in underserved markets in the Philippines and India. The Joseph Sigelman-led company helps create jobs, injects money into local communities in the form of investments, employment opportunities, and even taxes, and revives manufacturing and industrialization in rural Asia. Its floating storage unit (FSU) in Batangas Bay, for example, is revamping manufacturing and industrialization in the Luzon region, Philippines. On the other hand, Cheniere Energy, the biggest U.S. LNG exporter, is bringing jobs back to Louisiana and Texas as it pursues more liquefaction expansion opportunities. 

2.  Solar

Solar is the fastest-growing clean energy and arguably the most viable option in combating climate change. This is because solar energy is readily available from the sun and can be tapped and used in small quantities for domestic use or in large quantities for industrial use.

In the US, the Biden administration has injected $82 million into domestic solar manufacturing, a move that’s likely to triple the solar market in the country over the next five years. Europe, through the REPowerEU Plan, has also stepped up its investment in solar energy infrastructure.

Some of the solar energy companies you can consider investing in include First Solar Inc. (FSLR), a company that deals with solar panels and photovoltaic power plants. Another option is Enphase Energy (ENPH), a software-driven home energy solutions provider that specializes in solar and battery systems.

3.  Compressed Natural Gas (CNG)

CNG-powered cars are changing our everyday transportation. CNG is free of sulfur, benzene, and lead toxins. It’s non-corrosive and produces negligible amounts of carbon dioxide, carbon monoxide, and other suspended particles during combustion. CNG vehicles are, therefore, cleaner, more efficient, and more sustainable than diesel cars. Their maintenance and operation costs are competitive too because without lead, the longevity of their spark plugs is enhanced.

In India, the market share of CNG cars hit a record high of 8.60% in 2022, up from 6.30% in 2021. It’s projected that this figure will rise to up to 10% in 2023. The global demand for CNG vehicles is projected to grow to more than $312 billion over the next decade, up from $110.5 billion in 2022. This steady growth shows you how lucrative CNG investment will be in the near future. You can borrow a leaf from Joseph Sigelman’s huge investment in CNG stations in Asia. His company, AG&P, is in the process of building a network of 1,500 CNG stations to serve India’s transport sector.

Final word

Changing government incentives will push the world towards renewable and sustainable energy. Consumers are also more cautious than ever before about global warming and climate change. Any investor looking to invest in the energy sector must, therefore, buy shares in sustainability-focused energy stocks.

 

lng GAS
Global Trade Daily, News

Major Shifts in Global Energy Market Could Spell the End of Cheap Natural Gas

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Surging international demand for LNG could bring tighter supplies, rising prices, increased volatility.

While U.S. natural gas futures prices have fallen sharply in recent months, higher prices and increased volatility could be on the long-term horizon as the energy transition accelerates and European markets respond to recent supply constraints. Rising U.S. exports of liquefied natural gas (LNG), fewer opportunities for fuel-switching between coal and gas and supply chain bottlenecks could all contribute to higher domestic energy costs in the years to come.

According to a new report from CoBank’s Knowledge Exchange, growth in U.S. LNG export capacity will lead to an increasing interconnection between previously disconnected markets, creating a situation where events in one market will strongly influence outcomes in others.

The shale production boom ultimately led to the commissioning of LNG export facilities to absorb the excess supply. Today, the U.S. produces almost double the amount of natural gas it did in 2006 and total exports account for one-fifth of that production.In the next five years, upwards of 90% of gas demand growth could come from LNG exports, with as much as one-third of U.S. production possibly reserved for international trade. When Russia cut off natural gas to most of Europe last year, it created a supply vacuum that enabled U.S. LNG terminals to form the market equivalent of a land bridge to Europe. That laid the groundwork for greater competition between foreign and domestic markets.

Signs of the interconnection between the U.S. and European markets appeared last year as U.S. natural gas spot prices for delivery near Boston peaked in December around $35.00/MMBtu, as Northeast buyers outbid their Asian and European counterparts to sustain a continued flow of LNG imports. While true competition last year was fleeting, Viswanath expects to see greater ties later this decade as the next buildout introduces greater spare capacity to the system.

Over the past three decades, competition between natural gas and coal enabled fuel switching in response to price surges of either resource. However, that competition is fading quickly as coal production declines and the market impact of electric power fuel-switching has diminished. Structural changes are now driving more pronounced price movements for natural gas.

It is unclear if U.S. natural gas production can ramp up fast enough to meet the simultaneous acceleration of export growth and domestic electric generation. Until recently, fracking has simply not proved a great investment. Many shale operators consistently outspent cash flows, burning through hundreds of billions of dollars to fund the past two decades of growth. Production rose, but lack of returns sparked an investor exodus that has yet to meaningfully reverse.

Watch a video synopsis and read the report, Is This the Beginning of the End for Cheap Shale Gas?

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Archives, Global Trade Daily, Imports/Exports, International Trade

Qatar’s Strategies Towards Building a Sustainable and Resilient LNG Supply Chain

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According to Exxon Mobil’s Outlook for Energy (2017), the global market for natural gas (NG) should expand by around 45% over the next 20 years with demand for liquefied natural gas (LNG) expected to grow by more than 2.5 times within the same period. Acknowledged as a low carbon-intensive fossil fuel, natural gas is a cleaner, environmentally-friendly, and sustainable option for energy transition that reduces the use of high carbon-intensive fossil fuels, such as coal and crude-oil distillates. Natural gas is also ideal for increasing energy efficiency on the basis that energy release per mass during NG combustion is the highest amongst fuels (fossil- and biomass-based). Moreover, the amount of energy produced from renewables cannot supply global demands for a complete replacement of fossil fuels.

Accordingly, the LNG market is becoming highly competitive with more than 20 countries already supplying customers around the world. Major suppliers currently include Qatar, Australia, Malaysia, Russia, United States, Nigeria, Indonesia, Algeria, Egypt, to name but a few. Increased capital expenditure in the sector is coming and new LNG players are expected to enter the market in the years ahead. These include countries around the Eastern Mediterranean; the United States Geological Survey (U.S. Geological Survey Fact Sheet 2010 – 2014) estimates that the Levant Basin (involving Cyprus, Egypt, Israel, Lebanon, Palestine, and Turkey) contains 122.4 trillion cubic feet of technically recoverable gas.

In such a competitive environment, Qatar managed to maintain its position as the largest LNG exporter in the world (at 77.8mn tons) in 2019 (2020 World LNG Report), and is massively investing to preserve its role as the main global player. Qatar’s future strategies not only include the expansion of production capabilities by around 64% by 2027 to reach 126 million tons of LNG per annum (The Peninsula Qatar, 2019), but also its shipping capabilities through investment in a new fleet of LNG carriers. For instance, on June 1 this year, Qatar Petroleum announced the signing of the largest LNG shipbuilding agreement in history to secure more than 100 ships valued in excess of QR 70 billion to cater for its LNG growth plans (The Peninsula Qatar, 2020). Additionally, Nakilat, the shipping arm of Qatar’s LNG, will significantly increase its current 15% share of the global LNG fleet carrying capacity and will remain the largest owner of LNG carriers in the world for the coming decades.

This strategic investment will propel Qatar from being the world’s largest LNG exporter and producer to a globally-recognized champion of LNG supply chains. As things stand, an LNG supply chain commonly consists of three main links: exploration and production; treatment and liquefaction; and shipping and distribution. Expanding shipping capabilities will definitely strengthen the third link of Qatar’s LNG supply chain, whereas the first two links are already very well established.

By owning and controlling the whole LNG supply chain, Qatar has acquired a significant competitive advantage and moved further ahead of the competition in the LNG market. For instance, by owning independent shipping capabilities on top of well-established production and liquefaction facilities, Qatar will be better prepared and ready to respond to future unexpected risk events. Crucially, the country will also be able to recover quickly from any potential disruptions.

Accordingly, Qatar is building one of the most effective and resilient LNG supply chains in the world. The resilience of the country’s LNG supply chains will also increase international buyers’ trust and confidence in Qatar as a reliable LNG exporter. This reputation will in turn consolidate Qatar’s actual portfolio and help earn new market share. Being seen as a reliable supplier is extremely important in a business environment driven by oil-indexed long-term contracts of 15-25 years. Moreover, being the largest owner of LNG carriers in the world will provide Qatar with a huge competitive advantage in the spot and short-term markets. For instance, the LNG market was traditionally dominated by long-term contracts covering 20-25 years. However, thanks to the emergence of new suppliers and consumers, spot market purchases of LNG have also become a common practice. Indeed, spot and short-term LNG trades made up 32 percent of overall import volumes in 2018 (EnergyWorld, 2019) and are expected to rise over the coming years.

To sum up, by expanding its LNG shipping capabilities on top of its well-established production and liquefaction facilities, Qatar is building a holistic, efficient and resilient LNG supply chain. This will provide the country with a unique and significant competitive advantage in a highly competitive LNG business landscape.

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Dr. Adel Elomri and Dr. Brenno Menezes are Assistant Professors at the College of Science and Engineering, Hamad Bin Khalifa University.

       

This article is submitted on behalf of the author by the HBKU Communications Directorate. The views expressed are the author’s own and do not necessarily reflect the University’s official stance.