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U.S. supplier Cheniere Energy signed a liquefied natural gas sale and purchase deal with China National Petroleum Corporation (CNPC) this week, sealing the first direct and long-term LNG supply contract between companies in the two nations.
The deal guarantees CNPC 1.2 million tons of LNG every year. Supplies will incrementally increase from 2018 until 2023, after which export rates will level off until the contract ends in 2043.
A representative from Cheniere was picked to be part of President Donald Trump’s envoy during the leader’s trip to China in November. The deal was negotiated during summits as part of the state visit, representing an economic victory for the White House.
Last April, the Commerce Department said “companies from China may proceed at any time to negotiate all types of contractual arrangement with U.S. LNG exporters, including long-term contracts, subject to the commercial considerations of the parties.”
During his visit to China in October, U.S. Commerce Secretary Wilbur Ross stressed his intention “to reduce the trade deficit through increased exports of high-value U.S. goods and services to China and improved market access for U.S. firms.” The U.S. and China should work to overcome bilateral trade frictions through negotiation, the parties agreed, but Secretary Ross “reiterated the need for concrete deliverables and meaningful action on key issues.”
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Beijing anticipates growing LNG and oil demand as it phases out coal use across the country. China is on track to become the world’s top LNG importer over the next couple of years.
Crude oil imports to China hit another record in January, reaching 9.57 million barrels daily, for a total of 40.64 million tons, customs data showed. This is 400,000 bpd more than the previous record from March last year. Natural gas imports also continued to rise, hitting 7.7 million tons – the second-highest monthly import rate on record.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…