PetroChina is mulling over a suspension of U.S. LNG cargo purchases on the spot market during the winter in a bid to avoid having to pay a higher price due to retaliatory Chinese tariffs on U.S. goods, including LNG, Bloomberg reports, citing sources in the know.
The listed unit of state energy giant CNPC could either swap U.S. cargoes with other buyers in the region or seek alternative supplies, the sources said.
China slapped a 25-percent tariff on US$16 billion worth of U.S. goods and commodities—including LNG—in response to the latest round of tariffs imposed on Chinese goods by Washington. The tariffs enter into effect starting August 23 and there is already worry that this move could place an obstacle in the way of new U.S. LNG projects that have yet to be given the green light.
Since these projects cost billions, the companies behind them actively seek to secure funding for them by signing long-term purchase deals with the biggest LNG buyers in the world, which are led by Japan, but China is expected to overtake its neighbor soon.
Analysts cited by CNBC in August, when the latest tariffs were announced, said that the effect of the tariff shot exchange between Beijing and Washington will take several months to be felt, which could explain why PetroChina is considering a suspension of LNG imports from the United States in the winter.
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U.S. LNG producers could find an alternative market in Europe as per assurances from the president of the European Commission that the EU will take in more U.S. liquefied gas, but some of the planned LNG production projects in the United States may be hanging by a thread because capital is in short supply.
LNG from the United States accounted for just 5.7 percent of China’s total LNG imports as of end-June. However, the bigger problem stemming from the trade war would be the financing of these future LNG plants that should boost the U.S. producers’ presence on the global LNG market.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.