Roundhill Launches Liquified Natural Gas ETF

Roundhill Launches Liquified Natural Gas ETF

The war in Ukraine has boosted demand for LNG.

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Reviewed by: etf.com Staff
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Edited by: Mark Nacinovich

Roundhill Investments launched the Roundhill Alerian LNG ETF (LNGG) on Friday, offering investors the first liquified natural gas-focused exchange-traded fund on the market. 

Liquified natural gas, or LNG, has been in the spotlight the last couple of years because of Russia’s invasion of Ukraine. Russia provided Europe with 45% of its gas imports in 2021, but after the invasion, Russia cut gas exports to Europe by half. In response, Europe increased LNG imports by 65%, and is increasing its capacity to receive imports.  

“The shift away from relying so heavily on Russian gas will be nearly permanent; Europe has been awoken to look for new sources of energy,” David Mazza, chief strategy office at Roundhill, said in an interview. 

LNG More Environmentally Friendly 

Besides the immediate move toward LNG in Europe, Mazza said that natural gas, and liquified natural gas especially, will be important sources of fuel as the world switches to renewable sources of energy in the coming decades. According to Mazza, burning natural gas releases 40% less carbon dioxide than coal and 30% less than oil. Emissions of methane, a component of natural gas, may offset that advantage to some extent. 

Mazza said that LNG companies usually have lower volatility and higher yields than is typical for the energy sector because they have less exposure to the volatile exploration and production segment of the energy industry. 

Besides Europe, Mazza pointed to China, Vietnam and the Philippines as places that will use more liquified natural gas.  

Unlike oil, natural gas in its normal form can’t be moved overseas in tankers. To do so natural gas is converted to a liquid though a cooling process that allows it to be transported by ship. LNGG tracks an index of companies that liquify LNG, ship it and convert it back into a gas for use. 

LNG Prices Becoming More Global 

Because LNG is more difficult to ship than oil, Mazza said that natural gas prices remain much more localized than oil but that increased usage of LNG could change that situation. “We know many areas of the economy are becoming more localized, but LNG is becoming more global,” Mazza said.  

He estimated that global spending on LNG projects will be roughly $100 billion over the next five years, and Roundhill estimates that LNG will rise from 13% of the natural gas market in 2022 to 23% by 2050.  

The fund has 28 holdings and an expense ratio of 0.65%. 

Gabe Alpert is a former data reporter at etf.com with over seven years’ experience in financial journalism. He also previously contributed reporting and analysis to Barron’s Magazine, Investopedia and other publications.