A years-long, multi-front battle over the construction of terminals in the US capable of receiving liquefied natural gas (LNG) imports has quickly turned into a similarly fraught contest over the conversion of facilities for use as export terminals for the same commodity.

Less than half a decade ago observers were predicting imminent and substantial shortfalls of natural gas for domestic consumption. But US supplies didn’t diminish or stagnate. Quite the contrary: Energy producers combined horizontal drilling and hydraulic fracturing to exploit reserves of gas trapped in layers of shale rock in Pennsylvania, Texas and Louisiana.

The promise of these reserves–even President Obama has described the US as “the Saudi Arabia of natural gas”–is the impetus for the shift in focus from import-oriented LNG regasification terminals to export-oriented natural gas liquefaction facilities.

And now it seems that on a near-weekly basis an energy producer or combinations thereof announce plans to convert terminals originally built–some plants decades ago–for regasification liquefaction facilities.

In December 2012 the DoE released a study conducted by NERA Economic Consulting that found that exports would raise US gas prices. The study also concluded, based on all scenarios it considered, that “LNG exports have net economic benefits in spite of higher domestic natural gas prices…exactly the outcome that economic theory describes when barriers to trade are removed.”

This report gave significant short-term lift to LNG-export-focused energy stocks.

And there are a many US LNG export terminal projects in various stages of the regulatory approval process.

But the reality is that LNG projects are quite difficult to deliver due to a host of factors, including regulatory obstacles as well as challenges associated with financing and construction.

The latest: Shell US Gas & Power LLC, a subsidiary of Royal Dutch Shell Plc (London: RDSA, NYSE: RDS/A), and Southern Liquefaction Company LLC, a Kinder Morgan company and a unit of El Paso Pipeline Partners LP (NYSE: EPB), the general partner interest of which is controlled by Kinder Morgan Inc (NYSE: KMI), announced on Jan. 28, 2013, a plan to form a venture to develop a liquefaction plant in two phases at Southern LNG Company LLC’s existing Elba Island LNG terminal near Savannah, Georgia.

Part of the project will involve the modification of El Paso Pipeline’s Elba Express Pipeline and Elba Island LNG Terminal to move natural gas to the terminal and to load the LNG onto ships for export. The project is expected to have liquefaction capacity of approximately 2.5 million metric tons per year of LNG, or 350 million cubic feet of gas per day.

CEO Richard D. Kinder noted that the Elba Island project has already received “free-trade agreement approval” and added that the facility anticipates receiving non-free-trade agreement approval “in due course.”

Under existing law the US Dept of Energy (DoE) must determine whether an LNG gas export operation safeguards domestic needs and meets the public interest, especially for gas going to countries with which the US doesn’t have a free trade agreement (FTA), such as Japan.

Japan happens to be the largest importer of natural gas in the world. Its consumption of the cleaner-burning fuel has surged in the aftermath of the Fukushima Daiichi nuclear power plant disaster following the To-hoku earthquake and tsunami on March 11, 2011.

In June 2012 the Elba Island terminal received DoE approval to export up to 4 million metric tons a year, or 500 million cubic feet per day, of LNG to so-called FTA countries. In August 2012 it submitted a filing to the DoE seeking approval to export up to 4 million metric tons a year to non-FTA countries.

El Paso Pipeline Partners will own 51 percent of the entity and operate the facility. Shell will own the remaining 49 percent and subscribe to 100 percent of the liquefaction capacity. Management expects the project to benefit from use of Shell’s small-scale liquefaction unit, which will be integrated with the existing Elba Island facility and enable rapid construction compared to traditional large-scale plants.

Midstream stalwart and Conservative Portfolio Holding El Paso Pipeline Partners is a buy under USD40.

See Portfolio Update for a discussion of El Paso Pipeline Partners’ fourth-quarter and full-year 2012 results.

Other major energy companies have joined the rush to take advantage of lower production prices in the US relative to other markets around the world. Dominion Resources Inc (NYSE: D) wants to spend USD2 billion to convert its Cove Point, Maryland, facility to an import terminal. Dominion has signed agreements with big Asia-based customers, including Sumitomo, to ship LNG to Japan and elsewhere.

In December 2012 Sempra Energy (NYSE: SRE) filed for permission to add natural gas liquefaction and export facilities to its existing Cameron LNG terminal in Hackberry, Louisiana.

Cameron LNG already has received approval from the DoE to export to FTA countries. The company’s application to export to non-FTA countries, filed in December 2011, is expected to be among the first to be considered in 2013.

The liquefaction facility will utilize Cameron LNG’s existing facilities, including two marine berths capable of accommodating Q-Flex-sized LNG ships, three LNG storage tanks of 480,000 cubic meters and vaporization capability for regasification services of 1.5 billion cubic feet per day.

The new liquefaction facility will be comprised of three liquefaction trains with a total export capability of 12 million tons per year of LNG, or approximately 1.7 billion cubic feet per day. The facility is expected to begin delivering LNG to international markets in 2017.

In 2012 Cameron LNG signed commercial development agreements with Mitsubishi Corp (Japan: 8058, OTC: MSBHF, ADR: MSBHY) and Mitsui & Co Ltd (Japan: 8031, ADR: MITSY) of Japan and a subsidiary of France-based GDF Suez (France: GSZ, OTC: GDSZF, ADR: GDFZY). These agreements bind the parties to fund all development expenses, including design, permitting and engineering for the full capacity of the new facility.

In October 2012 the DoE approved Golden Pass Products LLC’s application to export LNG to FTA countries. Golden Pass is a joint venture between 70 percent owner Qatar Petroleum International and 30 percent owner and operator Exxon Mobil Corp (NYSE: XOM), which is the biggest producer of natural gas in the US.

Assuming Golden Pass gets a final go-ahead from its owners, the JV will spend USD10 billion converting a recently finished terminal Port Arthur, Texas, to import natural gas into a facility capable of exporting 15.6 million tons of LNG per year, or approximately 2 billion cubic feet per day.

Cheniere Energy Inc’s (NYSE: LNG) and affiliate Cheniere Energy Partners LP’s (NYSE: CQP) USD10 billion facility in Sabine Pass, Louisiana, which is scheduled to begin exporting cargoes in late 2015 or early 2016, is the furthest along to “first gas.” Cheniere has its permit, but Dominion, Sempra and Exxon are among at least 15 companies that have applications pending at the DoE to build export facilities.

Cheniere’s intent to sign contracts to export LNG to European and Asian buyers based on Henry Hub pricing has been described as “a dangerous precedent” and created “unrealistic expectations,” according to one executive of an energy company with similar designs to move the fuel from North America. Most development plans have been based on the traditional oil-linked pricing structure.

Cheniere may benefit in the short term by undercutting potential competitors, and the current unit price reflects the fact that it’s the only LNG export game in town at present.

But it remains burdened by a significant debt load created during the pre-2008 fervor to increase LNG import capacity.

And the lower pricing for its contracts will result in compressed margins that also limit distribution growth. Sell Cheniere Energy Partners.

Transport, though fraught with issues of overbuilding during several periods since the Methane Carrier left the Louisiana Gulf Coast for the UK in January 1959 with the first cargo of LNG, is our preferred way to play the story.

Although LNG producers in the US as well as in Australia face increasing pressures due to potential margin compression and rising project costs, their output must be moved to end-markets.

In addition to Japan–where the Fukushima Daiichi natural gas mini-boom will soon normalize–energy demand in India is forecast to more than double by 2035 to 49.2 quadrillion British thermal units from 21.1 quadrillion Btu in 2008, according to the US Energy Information Administration, while the share of gas in India’s power generation mix will expand from 11 percent in 2008 to 16 percent in 2035.

Growth Portfolio Holding Teekay LNG Partners LP (NYSE: TGP) is the third-largest independent owner-operator of LNG carriers in the world. Its fleet includes 27 LNG carriers as well as five liquefied petroleum gas carriers, 10 Suezmax segment ships and one product tanker. The company’s LNG fleet is largely contracted under long-term arrangements with little opportunity to capitalize, yet, on rising demand from Asia. Without much exposure to near-term rates, distribution growth has been limited. But the company’s access to cheap capital will fuel fleet growth over the long term.

And recent additions to the fleet provide a bit more visibility for payout growth. The company added four LNG carriers delivered between August 2011 and January 2012, and it also bought a 52 percent interest in six LNG carriers, an LPG carrier and a multi-gas carrier.

As of June 30, 2012, Teekay had approximately USD403 million of total liquidity, USD288 million undrawn on its credit facility and USD115 million in cash. Given this and the fact that the partnership has no near-term debt maturities and no restrictive loan covenants, the partnership is in a solid financial position to take advantage of further growth opportunities. Teekay LNG Partners is a buy under USD41.