Roundhill Investments has announced the launch of a new exchange traded fund (ETF) to offer exposure to the fast-growing liquefied natural gas (LNG) market. Listed on the New York Stock Exchange Arca under the symbol LNGG, the Roundhill Alerian LNG ETF is the world’s first dedicated LNG ETF. This innovative ETF provides investors with exposure to companies involved in the expanding LNG ecosystem, offering a unique blend of growth and income potential in the energy sector.
What is LNGG?
The Roundhill Alerian LNG ETF, or LNGG, is designed to allow investors access to leading companies that play a significant role across the entire LNG value chain. This includes companies engaged in liquefaction, LNG carriers, regasification and diversified firms participating in multiple segments of the LNG industry. The ETF's underlying index comprises 28 carefully selected constituents, with around 40% of its weight allocated to U.S.-based companies.
At launch, LNGG's largest holding is Cheniere Energy LNG, a key player in the liquefaction sector. The Zacks Rank #3 (Hold) company owns the Sabine Pass LNG facility consisting of six operational trains, with each train having a capacity of about 5 million tons per annum (Mtpa) for a total run-rate of approximately 30 Mtpa. Additionally, Cheniere Energy has a liquefaction and export terminal in Corpus Christi, TX.
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In addition to Cheniere Energy, holdings of LNGG include NextDecade Corporation NEXT and Shell plc SHEL.
LNG developer NextDecade recently announced a positive final investment decision for the first three liquefaction trains (Phase 1) at the export facility located in Brownsville, TX. The Rio Grande project, sprawling over 984 acres, is designed to produce lower carbon-intensive LNG for global markets. The project's full completion will enable NextDecade to export up to 27 Mtpa of low carbon-intensive LNG annually.
As far as Shell is concerned, its long-term strategy revolves around LNG. This London-based firm bought BG Group for $50 billion in 2016 to become the world’s largest producer and shipper of LNG.
The Growing Significance of LNG
LNG, or Liquefied Natural Gas, is natural gas that has been cooled to a liquid state, making it significantly more compact for transportation and storage purposes.
Per Shell’s 2023 LNG Outlook, demand for natural gas chilled to liquid form reached 396 million tons last year, up by 16 million tons from 2021 as Europe ramped up imports by 60% following slump in Russian pipeline shipments. It's important to note that just 100 million tons were traded in the year 2000. Being one of the biggest suppliers of LNG to global markets, the United States is well-positioned to leverage the boom.
Global LNG demand might continue growing for a long period and is projected to jump to around 650-700 million tons per annum by 2040. While increasing demand for gas in the European power sector will be a key factor in the near-term LNG supply rise, a consumption boost will also come from Asian importers like China, South Korea and India as part of efforts to switch from coal and heating oil for environmental reasons. As a matter of fact, the share of LNG in the global gas supply is projected to increase from the current 13% to 23% by 2050.
This growth is further supported by increased investments in greenfield LNG projects, with approved investments expected to reach $42 billion by 2024.
A Unique Financial Instrument
The Roundhill Alerian LNG ETF offers investors a unique opportunity to participate in the LNG market's growth while potentially generating income. The ETF tracks the Alerian LNG Index, which boasted a yield of 4.5% at the end of August. This means that investors in LNGG can potentially enjoy both capital appreciation and income generation, a rare combination in the energy sector. As the world's first dedicated LNG ETF, it represents a pioneering step in aligning investments with the evolving energy landscape.
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