Royal Business for Royal Dutch: Chevron Corporation (CVX)

Situation Elsewhere:

Cheniere Energy, Inc. (NYSEAMEX:LNG) was the first company after almost five decades to get a license in the US to export LNG to non-FTA countries like Japan and China. Cheniere is converting its LNG import facility at Sabine Pass, which became infeasible to operate after the supply glut of natural gas, into an export facility. Recently Pangea received the license to export LNG to the countries covered by the FTA with the US, and is building an LNG export facility at Corpus Christi Bay, working with its partner Statoil ASA(ADR) (NYSE:STO).

Though most of the companies are looking forward to exporting LNG to Asian countries to take advantage of the high price differential, the ones located on the West Coast have an added advantage to those lying on the East Coast.

The Pacific Edge:

The export terminals lying on the Pacific Ocean, like that of LNG Canada and Kitimat LNG, enjoy the added advantage of geographical proximity to Asian markets. This ensures lower shipping costs, as well as a greater profit margin for the operators. This adds to the premium price, around four times the price of natural gas in North America, that the companies will be able to take advantage of in the Asian markets of Japan and China.

Foolish conclusion:

If you are an oil and natural gas company, then you will always try to look to access markets from which you can derive the highest profit. Given the fact that Asian countries are the hot spots to sell natural gas, Shell is moving in the right direction and looks to boost its bottom line in the coming years once the LNG export facility becomes operational. Right now, it will be very hard for an investor to take his eyes off this stock.

The article Royal Business for Royal Dutch originally appeared on Fool.com and is written by Satarupa Bose.

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