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Progress in US-China LNG trade

as first new deal is unveiled

China’s Foran Energy Group has agreed to buy 26 cargoes from US LNG exporter Cheniere
Energy in a move that signals improving trade relations between the two countries

COMMENTARY THE first Chinese deal to buy US LNG since the supply contracts with US LNG producers in
trade war started between the two countries has 2018, after Beijing introduced retaliatory 10%
been announced. The deal, unveiled last week tariffs on shipments of the super-chilled fuel
WHAT: by Foran Energy Group, is comparatively small from the US amid an escalating trade war. The
China’s Foran has agreed but is seen as a sign of confidence in relations tariff was subsequently raised to 25% in June
to buy 26 LNG cargoes between the US and China normalising. 2019, but US-China LNG trade had already
from the US’ Cheniere Foran said it had signed a preliminary agree- stopped altogether prior to this, in March 2019.
over 2021-25. ment to buy 26 cargoes of LNG from leading US The US and China subsequently signed a
exporter Cheniere Energy between 2021 and preliminary trade deal in January 2020, under
WHY: 2025. Prices under the deal, which was struck which Beijing committed to significantly ramp-
Trade relations between during the annual trade fair in Shanghai, will be ing up purchases of US energy. China agreed to
the US and China are linked to the US’ Henry Hub benchmark. increase the value of energy imports by $52.4bn
improving and there is The deal comes shortly after the PipeChina above 2017 levels over 2020-21. Analysts warned
confidence that this will natural gas project was completed in the third as soon as the deal was struck that such a fig-
continue. quarter of this year, allowing third-party access ure would be difficult – if not impossible – to
to Chinese LNG terminals and natural gas pipe- achieve. Progress was also slowed by Chinese
WHAT NEXT: lines, according to comments from Cheniere’s demand slumping as it became the first country
Beijing nonetheless executive vice-president and chief commercial to go into lockdown owing to the coronavirus
believes that fully officer, Anatol Feygin. He added on his compa- (COVID-19) pandemic. However, the Asian
restoring relations ny’s third-quarter earnings call that Cheniere did country continues to ramp up US energy pur-
between the two not see the deal as a one-off. chases, even if current efforts are insufficient to
countries will take time. “It’s in a great market in South China for us meet the target set out in the Phase 1 deal.
that we can access and continue to support,” LNG trade between the two countries
Feygin said. “We think this as a whole cadre of resumed in March 2020, helped by China’s intro-
companies that we can engage with for years and duction of a tariff waiver programme in a bid to
look forward to continued success and contin- increase imports. But the country’s largest buy-
ued traction there.” ers of LNG remained hesitant to strike long-term
deals amid still-fragile bilateral relations and
Trade disruption ongoing market volatility. However, there are
Chinese buyers stopped signing longer-term hopes that relations are now starting to improve.

P14 www. NEWSBASE .com Week 46 19•November•2020