Page 6 - NorthAmOil Week 40

NorthAmOil COMMENTARY NorthAmOil
Sempra announces potential LNG supply deal with China
Sempra Energy’s MoU with a Chinese company over potential LNG supply co-operation suggests growing optimism that an end to the US-China trade war may be coming, writes Anna Kachkova
US-CHINA
WHAT:
Sempra has announced an MoU with China Three Gorges for possible co- operation on the supply of LNG.
WHY:
The US company is trying to find buyers for its
next LNG export project and recognises the importance of Chinese demand.
WHAT NEXT:
US President Donald Trump may be spurred to reach a deal with China by his impeachment inquiry.
US-BASED Sempra Energy has announced a pair of deals with China. One of the agreements – while not yet definitive – is notable for being the first US-Chinese LNG agreement announced in a year, having come about while the trade war between the two countries is ongoing.
The deal is a memorandum of understanding (MoU) between the US company’s Sempra LNG subsidiary and China Three Gorges (CTG) for “potential co-operation” on the supply of LNG to meet demand growth in China. This includes the growth of gas-fired power generation. Sem- pra noted that the companies’ participation ultimately depended on the finalisation of a definitive agreement, among other factors. No other details of the agreement were disclosed.
At the same time, Sempra announced that it had agreed to sell its Peruvian business to China Yangtze Power International (CYP), a subsidiary of CTG, for $3.59bn in cash. The deal includes Sempra’s 83.6% stake in Luz del Sur, Peru’s larg- est electric company. It also includes Sempra’s interest in Tecsur, which provides electric con- struction and infrastructure services to Luz del Sur and third parties, and Inland Energy, which is Luz del Sur’s generation business. According
to financial market data provider Refinitiv, the deal is the largest acquisition by a Chinese state- owned firm in the Americas since 2015.
The sale forms part of Sempra’s planned exit from South America as the company focuses on its core businesses in the US and Mexico. Sem- pra is also in the process of selling its businesses in Chile, including its 100% stake in Chilquinta Energía and Tecnored. The company anticipates being able to announce an agreement relating to these assets later this quarter.
Buyer and seller
The MoU with CTG comes as Chinese tariffs on US LNG remain in place, having first been imposed in September 2018. The initial retalia- tory tariff was set at 10%, but this was raised to 25% in June this year as tensions between the two countries worsened.
Chinese buyers have backed away from US LNG purchases during this time. According to the US Energy Information Administration (EIA), exports of US gas to China hit a record high of 103.4bn cubic feet (2.9bn cubic metres) in 2017, dipping to 90.5mn cubic feet (2.6 bcm) in 2018 as trade tensions escalated. For this year
China is expected to become the world’s leading importer of LNG within five years.
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w w w . N E W S B A S E . c o m Week 40 08•October•2019