Insights

Brookfield Sees Natural Gas as an Essential Fuel for the Future

Natural gas is playing an increasingly vital role in fueling the global economy. The cleaner-burning fossil fuel — its emissions are almost half that of coal — is an essential bridge to cleaner alternative energy sources. Meanwhile, it’s becoming critical for global energy security. 
Those dual roles have Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP) growing increasingly bullish on natural gas’ future. Given its extensive infrastructure to transport, store, process, and export that vital fuel, the company believes it’s in an excellent position to benefit from this gas-powered future.
Image source: Getty Images.

Natural gas’ increasing crucial role
Brookfield Infrastructure’s CEO Sam Pollock wrote about the importance of natural gas in the company’s first-quarter letter to investors. He penned the following: 

For the past two years, we have been operating in a market environment of disrupted supply chains and rising commodity prices. The recent impact of geopolitical events in Europe has spotlighted the importance of energy security and catalyzed further commodity price appreciation. Natural gas, and more specifically LNG, will continue to be a leading transition fuel in the move toward net zero and is also expected to play a key role in providing global energy security. These elements highlight the valuable part our critically located infrastructure plays in the processing, transportation, and distribution of natural gas.

Climate change concerns and geopolitical events are forcing counties to simultaneously focus on increasing energy security and reducing carbon emissions. That’s opening the door for liquefied natural gas (LNG). It offers a lower emissions profile than oil and coal. It can also provide energy security because companies can sign long-term supply agreements with counties that have stable regulatory and political environments.
A trio of LNG-fueled growth drivers
Pollock noted that Brookfield’s North American midstream businesses are in an excellent position to benefit from rising gas demand. He wrote that the company:

Own(s) three businesses that are expected to benefit from increased demand for LNG in support of the transition to a low carbon economy. Specifically, there is significant new interest in securing capacity at U.S. LNG export terminals; customers on our U.S. natural gas pipeline are discussing the contracting options for a third phase of our gulf coast egress; and our Canadian midstream business is well situated to process and support gas deliveries to west coast LNG export terminals currently under construction.

Brookfield acquired a stake in LNG export terminal operator Cheniere Energy Partners (NYSEMKT: CQP) in late 2020, partnering with funds managed by Blackstone Group (NYSE: BX) on the deal to purchase the investment from some of Blackstone’s other funds. That investment is starting to pay big dividends. Cheniere Energy Partners recently completed its sixth LNG liquefaction train at its Sabine Pass facility, which will drive growth over the coming year. 
Meanwhile, the company owns a stake in the Natural Gas Pipeline Company of America. It has already completed two expansions of the system to the Gulf Coast and is now exploring a potential third expansion, driven by rising demand to export more natural gas. 
Finally, Brookfield’s Canadian midstream operations, which it acquired from Enbridge in 2018, will benefit from the future completion of Shell’s (NYSE: SHEL) LNG Canada project. Shell and its partners are currently building the first two LNG trains, which will have the capacity to produce 14 million tons per year by the middle of this decade. Meanwhile, Shell could expand the facility to four trains in the future. As Shell starts exporting gas, it will enable Canadian producers to increase their output, which could provide Brookfield with new expansion opportunities. 
In addition, the company is always on the lookout for new investment opportunities. Given its bullish view on natural gas, Brookfield could seek to acquire additional gas-related infrastructure or help finance expansion projects developed by third parties.
Stepping on the gas
Brookfield Infrastructure believes natural gas has a bright future given its increasingly crucial role in fueling the global economy. That thesis led the company to make several gas infrastructure investments in recent years to increase its exposure to the fuel’s long-term upside. Those investments should help fuel growth in the coming years, which should enable the company to continue growing shareholder value, including increasing its 3.1%-yielding dividend.
Matthew DiLallo has positions in Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, and Enbridge. The Motley Fool has positions in and recommends Enbridge and The Blackstone Group Inc. The Motley Fool recommends Brookfield Infra Partners LP Units, Brookfield Infrastructure Corporation, and Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy. –

Natural gas is playing an increasingly vital role in fueling the global economy. The cleaner-burning fossil fuel — its emissions are almost half that of coal — is an essential bridge to cleaner alternative energy sources. Meanwhile, it’s becoming critical for global energy security. 

Those dual roles have Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP) growing increasingly bullish on natural gas‘ future. Given its extensive infrastructure to transport, store, process, and export that vital fuel, the company believes it’s in an excellent position to benefit from this gas-powered future.

Image source: Getty Images.

Natural gas’ increasing crucial role

Brookfield Infrastructure’s CEO Sam Pollock wrote about the importance of natural gas in the company’s first-quarter letter to investors. He penned the following: 

For the past two years, we have been operating in a market environment of disrupted supply chains and rising commodity prices. The recent impact of geopolitical events in Europe has spotlighted the importance of energy security and catalyzed further commodity price appreciation. Natural gas, and more specifically LNG, will continue to be a leading transition fuel in the move toward net zero and is also expected to play a key role in providing global energy security. These elements highlight the valuable part our critically located infrastructure plays in the processing, transportation, and distribution of natural gas.

Climate change concerns and geopolitical events are forcing counties to simultaneously focus on increasing energy security and reducing carbon emissions. That’s opening the door for liquefied natural gas (LNG). It offers a lower emissions profile than oil and coal. It can also provide energy security because companies can sign long-term supply agreements with counties that have stable regulatory and political environments.

A trio of LNG-fueled growth drivers

Pollock noted that Brookfield’s North American midstream businesses are in an excellent position to benefit from rising gas demand. He wrote that the company:

Own(s) three businesses that are expected to benefit from increased demand for LNG in support of the transition to a low carbon economy. Specifically, there is significant new interest in securing capacity at U.S. LNG export terminals; customers on our U.S. natural gas pipeline are discussing the contracting options for a third phase of our gulf coast egress; and our Canadian midstream business is well situated to process and support gas deliveries to west coast LNG export terminals currently under construction.

Brookfield acquired a stake in LNG export terminal operator Cheniere Energy Partners (NYSEMKT: CQP) in late 2020, partnering with funds managed by Blackstone Group (NYSE: BX) on the deal to purchase the investment from some of Blackstone’s other funds. That investment is starting to pay big dividends. Cheniere Energy Partners recently completed its sixth LNG liquefaction train at its Sabine Pass facility, which will drive growth over the coming year. 

Meanwhile, the company owns a stake in the Natural Gas Pipeline Company of America. It has already completed two expansions of the system to the Gulf Coast and is now exploring a potential third expansion, driven by rising demand to export more natural gas. 

Finally, Brookfield’s Canadian midstream operations, which it acquired from Enbridge in 2018, will benefit from the future completion of Shell’s (NYSE: SHEL) LNG Canada project. Shell and its partners are currently building the first two LNG trains, which will have the capacity to produce 14 million tons per year by the middle of this decade. Meanwhile, Shell could expand the facility to four trains in the future. As Shell starts exporting gas, it will enable Canadian producers to increase their output, which could provide Brookfield with new expansion opportunities. 

In addition, the company is always on the lookout for new investment opportunities. Given its bullish view on natural gas, Brookfield could seek to acquire additional gas-related infrastructure or help finance expansion projects developed by third parties.

Stepping on the gas

Brookfield Infrastructure believes natural gas has a bright future given its increasingly crucial role in fueling the global economy. That thesis led the company to make several gas infrastructure investments in recent years to increase its exposure to the fuel’s long-term upside. Those investments should help fuel growth in the coming years, which should enable the company to continue growing shareholder value, including increasing its 3.1%-yielding dividend.

Matthew DiLallo has positions in Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, and Enbridge. The Motley Fool has positions in and recommends Enbridge and The Blackstone Group Inc. The Motley Fool recommends Brookfield Infra Partners LP Units, Brookfield Infrastructure Corporation, and Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

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