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NorthAmOil COMMENTARY NorthAmOil

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

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

Cheniere hopes to
strike more deals with
Chinese companies.

Week 45 12•November•2020 www. NEWSBASE .com P11