Trump’s China deal boosts U.S. LNG

Trump’s China deal boosts U.S. LNG 

America’s liquefied natural gas could soon head to China under long-term contracts for the first time, bolstered by a new trade deal announced last week that may not change existing rules.

“Until now, Chinese buyers have not bought long-term LNG supply from the U.S. directly. This ensures U.S. LNG entering the Chinese market will be politically palatable,” said Massimo Di-Odoardo, head of Global Gas and LNG research at global natural resources consultancy Wood Mackenzie.

“The agreement connects the U.S., the fastest growing LNG supplier, with China, the largest LNG growth market,” Di-Odoardo added.

By 2030, Wood Mackenzie expects Chinese LNG demand to reach 75 million metric tonnes per year (MMTPA), triple 2016 imports, Kallanish Energy learns.

“This is equivalent to $26 billion a year at today’s prices ($7 per million Btu, MMBtu), and the U.S. is keen for a slice of the pie,” Di-Odoardo said.

Cheniere Energy, the first exporter of natural gas from the Lower 48 States, sees the agreement as “amplifying and accelerating conversations about new long-term contracts” with China, spokesman Eben Burnham-Snyder told Bloomberg.

Fifteen months after Cheniere shipped its first cargo of LNG, putting the U.S. on course to become a net exporter of the fuel by next year, the agreement between the world’s two largest economies may unleash even more American supply on a glutted global market.

“In the last month, Cheniere has had extensive negotiations with several Chinese commercial entities and, obviously, with this agreement, we expect this to continue and accelerate,” Burnham-Snyder told Bloomberg.

While Cheniere shipped nine cargoes from its Sabine Pass facility in Louisiana to five terminals in China over the last year, according to Burnham-Snyder, those cargoes were sold on the spot market, not under long-term contracts.

The deal clarifies, doesn’t change, U.S. policy on LNG exports to China, Zach Allen, president of Pan Eurasian Enterprises, a Raleigh, N.C.-based tracker of LNG shipments, told Bloomberg.

“It sounds like a re-iteration of pre-existing conditions,” Allen said. “I was not aware of any unusual barriers to U.S. LNG exports to China imposed by U.S. restrictions.”

The deal increases pressure on competing suppliers, including new LNG projects from Australia, East Africa and Canada, as well as new pipe and LNG projects from Russia, according to Wood Mackenzie.

https://www.kallanishenergy.com/2017/05/15/trumps-china-deal-boosts-u-s-lng/