Cheniere Energy, Inc. (ticker: LNG) has entered into two LNG sale and purchase agreements (SPA) with China National Petroleum Corporation (CNPC).
Under the SPAs with Cheniere’s subsidiaries, Corpus Christi Liquefaction, LLC and Cheniere Marketing International LLP, CNPC subsidiary PetroChina International Company Limited will purchase approximately 1.2 million tons per annum of LNG, with a portion of the supply beginning in 2018 and the balance beginning in 2023.
The term of each SPA continues through 2043 and the purchase price for LNG will be indexed to the Henry Hub price, plus a fixed component.
“We are pleased to announce these LNG contracts with China National Petroleum Corporation, an important global energy player in one of the largest and fastest growing LNG markets worldwide,” said Jack Fusco, Cheniere’s president and CEO. “These long-term SPAs build upon the Memorandum of Understanding we signed in November, and we look forward to a successful long-term partnership with CNPC. We expect these agreements to support the development of Corpus Christi Train 3, and we are now focused on completing the remaining necessary steps to reach a final investment decision later this year.”
In the past few months, China had been noted for short-term spot contracts. “Chinese buyers rely much more on short-term purchases to meet their needs than their counterparts in Japan and South Korea,” Reuters reported in late December. Shipping data in Thomson Reuters Eikon shows that China’s imports of LNG will have risen by more than 50 percent in 2017 compared with the previous year to around 38 million tons.
Trafigura signed up for 15 years
Cheniere also recently entered into a LNG SPA with Trafigura Pte Ltd., a Geneva-based independent trader of oil and petroleum products. Trafigura’s LNG team is based in Houston, Geneva and Singapore.
Trafigura has agreed to purchase approximately 1 million tons per annum of LNG from Cheniere Marketing on a free on-board basis for a term of 15 years beginning in 2019. The purchase price for LNG is indexed to the monthly Henry Hub price, plus a fee.
“We are pleased to have signed a long-term SPA with Cheniere who is a growing and reliable producer of LNG. This deal will support our LNG infrastructure platform and provide further security of supply to our customers,” Head of LNG for Trafigura, Hadi Hallouche, told Oil & Gas 360®.
China’s own NatGas production not slowing down
The International Energy Outlook 2017 reference case calculated by the EIA projects China’s shale gas production will grow from 0.7 Bcf/d in 2016 to 10 Bcf/d by 2030 and 19 Bcf/d by 2040, when shale gas is projected to account for a third of China’s total natural gas supply.
China’s natural gas production from other sources, such as coalbed methane, tight formations, and more traditional natural gas reservoirs, is projected to increase more modestly, from 12 Bcf/d from these sources in 2016 to 20 Bcf/d by 2040.
China became the world’s second largest LNG importer in 2017.
