Energy Infrastructure
What the Push for Energy Security Means for North American Supply, and the Potential Benefits for Energy Infrastructure
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Aug 03, 2023
As governments around the globe seek safer and more secure energy sources, we believe North American energy is well positioned to fill any gaps. This is especially true in Europe, which turned to the U.S. in 2022 when Russian natural gas flows dried up. In fact, about two-thirds of the continent’s new year-over-year liquefied natural gas (LNG) imports came from the U.S. in 2022.
We see North American LNG export growth continuing, thanks to the affordability and reliability of the region’s supply. The charts above show North American LNG export capacity is on target to double at the same time that Europe is increasing the number of facilities it has to convert LNG to natural gas. These capacity increases should enable Europe to import more LNG and decrease its reliance on Russian hydrocarbons.
We believe energy infrastructure companies are poised to capitalize from these increased volumes over the long term, given that the bulk of the new capacity is set to become operational by 2030 and LNG assets typically operate with 15- to 20-year fee-based contracts. Although the developers of new LNG export capacity may benefit most directly, the entire midstream value chain may see an uplift in future cash flows and growth prospects, potentially creating an attractive equity opportunity for investors.
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