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China’s energy giant Sinopec has signed a long-term delivery contract for liquefied natural gas with U.S. Venture Global in what has become the biggest such deal in China.
Quoting state news agency Xinhua, Channel News Asia reported that the gas, which will be delivered for 20 years initially, will come from Venture Global’s plant in Louisiana. Separately, a subsidiary of Sinopec will buy 3.8 tons of LNG from another Venture Global facility, in Calcasieu Pass. The annual supply size or value of the bigger deal was not disclosed.
The news report follows earlier ones from Reuters, which said in October that Sinopec had sealed three LNG delivery deals with Venture Global, two of which would see the Chinese state company receive 4 million tons of liquefied natural gas annually over the 20 years of the contract.
The deals, Reuters reported at the time, would double the total LNG imports into China from the United States. Yet the deals will not solve China’s immediate energy problems: the Louisiana liquefaction plant in Plaquemines has yet to receive its final investment decision, and only then will construction begin. The Calcasieu Pass facility is also at the pre-construction stage.
“China is absolutely key to global LNG market growth,” Frank Harris, head of global LNG consulting at Wood Mackenzie, said, as quoted by the Financial Times in October. “If Chinese buyers are now ready to sign long-term US deals again, it’s hugely significant for US LNG players in terms of supporting development of new capacity.”
Asia as a whole has become an even bigger market for U.S. LNG, leaving Europe behind as Asian buyers were willing to pay more for deliveries amid the energy crunch.
Going forward, a rebalancing of the gas market could once again make U.S. gas popular with European buyers for diversification reasons, if nothing else. Yet, with Asia’s insatiable appetite for energy and its willingness to pay a premium for U.S. LNG because of the lack of major pipeline supplies, it is likely to remain as the ultimate market for U.S. LNG.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com