Buffett Bets on Natural Gas Amid Global Recession Concerns

Dominion Energy Acquires 4 Trillion Won Stake

Berkshire Hathaway, chaired by Warren Buffett, has agreed to acquire a 50% stake in 'Cove Point LNG,' one of the liquefied natural gas (LNG) export terminals of the U.S. energy company Dominion Energy, for $3.3 billion (approximately 4.3 trillion KRW), Bloomberg reported on the 10th (local time).

With this deal, Berkshire Hathaway will secure a 70% stake in Cove Point LNG. The remaining 25% is held by Brookfield Infrastructure Partners, an infrastructure asset management company headquartered in Canada.

Cove Point is a natural gas export-import storage facility located in Maryland, about 97 km southeast of Washington, D.C. It is one of six LNG export terminals currently operating in the U.S. It also has a long-term contract with Sumitomo Corporation of Japan, which Buffett recently acquired.

Previously, in 2020, Buffett initially acquired Dominion Energy's natural gas transportation and storage assets (valued at $4 billion) for $9.7 billion, including debt of $5.7 billion. In that transaction, he also secured a 25% stake in Cove Point LNG.

Warren Buffett, Chairman of Berkshire Hathaway.
Photo by AP Yonhap News

Berkshire Hathaway's bet on the natural gas market amid recession concerns is analyzed as a consideration of the growing energy crisis amid geopolitical conflicts. Following Russia's invasion of Ukraine in February last year, natural gas prices surged, allowing energy companies to reap windfall profits.

As Russia weaponized energy in response to Western sanctions, U.S. LNG imports to Western Europe, the largest importer of Russian natural gas, increased significantly. Bloomberg evaluated, "With this deal, Berkshire Hathaway has gained control over one of the only six LNG export terminals in the U.S."

Through this acquisition, Berkshire Hathaway has secured control over gas pipeline and gas storage businesses in its existing energy operations. Berkshire Hathaway Energy, a subsidiary of Berkshire Hathaway with a 92% stake, holds about an 18% share of the U.S. gas transportation market.

Dominion Energy is the second-largest electric power and energy company in the U.S. by market capitalization and operates one of the largest underground natural gas storage systems in the country. Dominion Energy's stock, listed on the New York Stock Exchange, closed down 1.26% at $51.58 on the day. The stock has plunged nearly 37% from its high of $81.80 over the past year, hit hard by the Biden administration's zero carbon emissions policy for the power sector. Dominion Energy plans to sell its natural gas business segment and focus on eco-friendly energy fields such as solar power.