Short-seller Jim Chanos announced on CNBC on Wednesday a new short position in liquefied natural gas player Cheniere Energy, a company in which billionaire hedge fund manager Carl Icahn has recently taken a sizable long position.
"We've been pretty negative for the past six months on this LNG space. We think it's a looming disaster," the founder and president of Kynikos Associates said on "Squawk Box."
"It's a little bit tied into Asia," Chanos said of his latest short. "LNG was seen as a savior of a lot of natural gas plays, a way to basically satiate the incredible demand for energy out of Asia. The problem is ... everybody figured it out ... at the same time."
Last month, Icahn announced an 8.2 percent stake in Cheniere, and days later the company allowed Icahn to appoint two new board members.
"We might have crossed a few trades. I don't know," said Chanos—referring to the stake Icahn built.
"LNG demand isn't growing anymore. We already have excess capacity, and we're about to pretty much almost double the capacity globally over the next four years," he said—pointing to a slowdown prediction in June from the International Energy Agency.
For its part, Cheniere's Sabine Pass LNG terminal in Louisiana is expected start exports in mid-December, making it the first LNG export terminal in the lower 48 states. Cheniere is building another LNG export terminal in Corpus Christi, Texas.
"LNG has been seen as a unique animal because it's going to be U.S. based. [Cheniere] is opening its Sabine Pass later this year," Chanos said.
"[But] with the stock at 30 times 2020 earnings, with the upside coming from a glutted market," he continued, "we think the risk-reward in this, given where other LNG plays are in Australia and elsewhere, is just completely out-of-whack."
As described by the Energy Department, LNG is principally used for transporting natural gas to markets, where it's turned back into a gas and distributed for a variety of uses, including running nat gas vehicles.