China is aiming for billion dollar business with US liquefied natural gas

LNG transporter in the Sinopec Terminal in Tianjin

Sinopec alone could envisage deliveries over four million tons a year.

(Photo: Reuters)

Singapore, New York According to insiders, large Chinese companies are in advanced talks with US exporters about a multi-billion dollar contract for the supply of liquefied natural gas (LNG) in light of the energy crisis. At least five corporations would negotiate, including the state-owned Sinopec and the China National Offshore Oil Company (CNOOC), several people familiar with the matter told Reuters on Friday.

The deal could be worth tens of billions of dollars.

“We expect contracts to be signed before the end of the year,” said one of the participants from Beijing. “This is mainly being driven by the global energy crisis and the prices we are seeing now. US deliveries are now attractive. ”On the US side, negotiations are mainly with Cheniere Energy and Venture Global.

Sinopec alone could envisage deliveries over four million tons annually, said one of the insiders. The liquefied gas can be delivered by large tanker ships, where it can be converted back into gas and then fed into the gas network. The companies initially did not want to comment when asked.

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Rising gas prices and increasing blackouts have raised the question of security of supply in the People’s Republic. The talks with the US side that had already started at the beginning of the year have therefore picked up speed in the past few weeks. China has already overtaken Japan as the world’s largest LNG buyer this year and could consolidate this position.

“State companies are under pressure”

“State companies are all under pressure to maintain security of supply,” said a Beijing-based trader. The recent price hike has increased the need for long-term supply agreements. Natural gas prices in Asia have more than quintupled this year. This increases concerns about a power shortage in winter.

At the height of the Sino-American trade war in 2019 under the then US President Donald Trump, gas trade between the two largest economic powers in the world came to a brief standstill.

If there is an early deal between the two sides, Europe could be left behind. The gas storage facilities here are not as full as they were last year, experts say. The prices for pollution rights (CO2 certificates), which are required for the operation of gas-fired power plants, have risen sharply.

Tankers with liquefied natural gas (LNG) head for Asia instead of Europe, where even higher prices can be achieved. The wholesale prices at the important Dutch gas trading point have therefore risen by more than 400 percent since January. The wholesale prices for electricity have doubled.

More: The big winner of the gas price crisis is Russia

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