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As Chinese demand for liquefied natural gas (LNG) surges amid the coal-to-natural gas switch, companies are looking to secure supplies—and one of the biggest Chinese firms is turning to the world’s biggest LNG exporter, Qatar.
PetroChina is in advanced talks with Qatar to buy short-term and long-term LNG supplies, Reuters reports, citing three sources briefed on the discussions.
China wants to secure LNG supplies and avoid last winter’s natural gas shortages, when natural gas demand spiked in the coldest months amid the massive push to have millions of households and thousands of industry users switch from coal to natural gas.
The push to cut pollution and make households switch to natural gas for heating resulted in China becoming the world’s second-largest LNG importer in 2017, outpacing South Korea and second only behind Japan, the EIA said this past winter.
Qatar, for its part, aims to boost its LNG export capacity from the current 77 million tons to 100 million tons annually by 2024.
According to two of Reuters’ sources, PetroChina and Qatar are negotiating a possible deal for several million tons of annual LNG supply beginning this year and ending in 2022. The Chinese company is also in talks to sign a longer-term deal with Qatar, according to a third source.
“The short-term deal is to supplement an existing long-term agreement,” one of the sources, a Beijing-based industry executive, told Reuters.
Although Qatar faces increased competition from Australia, the United States, and Russia, for example, it is one of the most competitive suppliers to China because of its low costs, large production volumes, and geographical proximity, Chen Zhu, managing director at consultancy SIA Energy, told Reuters.
Last week, China included for the first time U.S. LNG in its list of goods up for a potential 25-percent import tariff in the ongoing trade war. Chinese LNG end-users and suppliers say that they would likely deter spot procurement of U.S. LNG cargoes in the near term amid the uncertainty over the possible tariff.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.