Page 6 - NorthAmOil Week 42 2021

NorthAmOil COMMENTARY NorthAmOil

China seeks more US LNG

Chinese natural gas importers are once more ramping up their

purchases from US suppliers as the country battles an energy

crunch in the run-up to the peak winter demand season

US-CHINA US LNG supplier Venture Global LNG has offi-
cially joined compatriot Cheniere Energy in hav-
WHAT: ing closed a long-term supply deal with Chinese
Chinese buyers have buyers.
signed term contracts It emerged this week that Venture Global
with Venture Global LNG had signed two 20-year offtake contracts with
and Cheniere Energy. China’s state-run Sinopec on September 1 for
a combined 4mn tonnes per year (tpy) of sup-
WHY: ply. Venture Global disclosed the deal to the US
China is increasingly Department of Energy (DOE) on October 1,
turning to US LNG supply with the DOE then publishing that information
amid a surge in global on October 19.
prices. The contracts – one for 2.8mn tpy and the
other for 1.2mn tpy – will be fulfilled by Venture Venture Global is
WHAT NEXT: Global’s proposed 20mn tpy Plaquemines LNG Gas. This was the first major US-China LNG preparing to start up
Chinese demand for gas facility in Louisiana. deal since 2018 and illustrates how US LNG is one liquefaction plant in
will continue to soar The news comes after Cheniere’s announce- becoming increasingly attractive to Chinese Louisiana and sanction
as the country strives ment last week that it had closed a term supply buyers. a second.
to slash emissions this deal with privately owned ENN Natural Gas as Reuters cited traders as saying that a deal sim-
decade. well as recent media reports that both Venture ilar to ENN’s, at $2.50 plus 115% of Henry Hub
Global and Cheniere were in talks with several futures, would work out as roughly about $9-10
Chinese Energy over new long-term supply per mmBtu ($248.94-276.60 per 1,000 cubic
deals. metres) on a delivered basis into Northeast Asia.
This would include an average shipping cost of
Trade talk $2 per mmBtu ($55.32 per 1,000 cubic metres)
Citing several sources familiar with the matter, for LNG travelling from the US to China.
Reuters said last week that the “advanced” talks Reuters cited consultancy Poten & Partners’
involved at least five Chinese companies, includ- global head of business intelligence, Jason Feer,
ing state-owned Sinopec and China National as saying Chinese companies were heavily
Offshore Oil Corp. (CNOOC), as well as local exposed to Brent-related pricing for LNG and
government-backed energy distributor Zhejiang that US purchases offer some pricing diversity.
Energy. Cheniere had said in late September that it
The newswire said the discussions were expected to announce “a number” of transac-
mainly being held with leading US LNG pro- tions, so other deals appear set to follow.
ducer Cheniere, as well as Venture Global, Both the news about the Venture Global and
which is preparing to bring its first liquefaction Cheniere deals as well as reports of ongoing sup-
plant – the 10mn tpy Calcasieu Pass project ply talks come as US-China LNG trade booms
– online. after having briefly stopped in 2019-2020 owing
One of Reuters’ sources said Sinopec alone to their escalating trade war.
was looking to buy up to 4mn tpy, as it is more
exposed to the spot market than its domestic Geopolitical thaw
rivals; this speculation has been borne out by Shipments of US LNG to China resumed
the DOE’s recent announcement. in March 2020 and hit a new record high of
The news service also cited traders as saying 46.8bn cubic feet (1.3bn cubic metres) in April
Sinopec was in final-stage talks with three or 2021, according to the US Energy Information
four companies to buy 1mn tpy over a 10-year Administration (EIA), which has published data
period, with some of these volumes potentially up to July so far.
coming from the US. Indeed, previous talks between Sinopec and
The Reuters report came after Cheniere said Cheniere over a long-term supply deal fell apart
last week that it had struck a 13-year deal to sup- as a result of the trade war and the collapse in
ply LNG to China’s privately owned ENN Natural LNG spot prices that happened around the same

P6 www. NEWSBASE .com Week 42 21•October•2021