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China’s love for US gas

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LNG Industry,

Bloomberg are reporting on the budding relationship between US gas sellers and Chinese buyers after an agreement struck this month by the US and Chinese governments welcomed the Asian country’s investments and purchases of American gas.

Gas is poised to play a larger role in US-China trade relations as the US government works to trim a trade deficit and as the world’s largest energy consumer seeks to boost the share of natural gas in its energy mix and lower prices that last year were the world’s highest.

While the trade deal announced on 11 May does not appear to alter access for Chinese companies to US gas cargoes, it welcomes China to receive shipments and engage in long-term contracts. That may be able to ease concerns in China that involvement in the US LNG industry would be met with wariness.

US supplies accounted for almost 7% of China’s LNG imports in March. These cargoes were supplied to end-users through intermediaries or spot deals since China currently has no long-term contracts to directly buy American gas.

Longer supply contracts, which can run more than 20 years, traditionally help underpin the financing of export projects by providing lenders with confidence the developments will have stable customers. They also strengthen the relationship between the buyer and the plant operator or gas producer, opening the door to investing directly in the export plants.

Sinopec’s trading unit, Unipec, is considering the US, among other producers, for possible long-term LNG contracts for supply starting around 2022.

China International United Petroleum & Chemicals Co., as Unipec is officially known, may use the cargoes for both domestic demand as well as for its trading book. The company resold about 20% of its 10 million t of annual supply last year to Europe, the Middle East and Mexico.

ENN Energy Holdings Ltd., one of the country’s biggest gas distributors and a budding LNG importer, is considering US supplies if it offers acceptable price and flexibility.

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