US gas ex­porters rush to sell LNG to China

But the talk may all be hot air if the US sup­pli­ers can’t com­pete with bar­gain prices agreed on deals

The Star Malaysia - StarBiz - - Foreign News -

BEI­JING: US gas ex­porters and traders are aim­ing to grab a big­ger chunk of the lu­cra­tive, grow­ing busi­ness of ex­port­ing gas to China, the world’s third-largest buyer, when they ac­com­pany com­merce sec­re­tary Wil­bur Ross to China next month.

But the talk may all be hot air if the US sup­pli­ers can’t com­pete with bar­gain prices agreed on longterm deals with ri­vals Aus­tralia, Qatar and Malaysia.

Ac­cord­ing to a list seen by Reuters, 10 of the 29 com­pa­nies trav­el­ling with Ross and US pres­i­dent Don­ald Trump are in­volved in en­ergy and gas.

Among them are Che­niere En­ergy Inc, which op­er­ates the only US LNG ex­port ter­mi­nal and Free­p­oint Com­modi­ties, founded and run by David Messer, who led power util­ity Sem­pra’s vaunted com­modi­ties di­vi­sion.

Their pres­ence un­der­scores the US am­bi­tion to sell more of its ex­cess gas abroad as the US shale revo­lu­tion threat­ens to upset the global LNG mar­ket.

China’s ap­petite has soared as it em­barks on an au­da­cious bid to heat mil­lions of homes across the north by gas for the first time this win­ter and switch tens of thou­sands of in­dus­trial boil­ers to the cleaner fuel as part of its push to clear the skies.

With­out suf­fi­cient do­mes­tic out­put to meet grow­ing de­mand, im­ports have surged this year, of­fer­ing huge po­ten­tial for ma­jor ex­port­ing na­tions such as the United States.

“We’re on the mis­sion to talk to Chi­nese com­pa­nies to get some­thing signed up,” said Fred­er­ick Jones, founder and chief ex­ec­u­tive of Delfin Mid­stream LLC, which is build­ing float­ing LNG ves­sels that would sit 80km off the coast of Louisiana.

He’s head­ing to Bei­jing on the trip sched­uled to be­gin on Nov 8 with his chief fi­nan­cial of­fi­cer Matthew Weil. Delfin has no cus­tomers yet for its new ter­mi­nal, but hopes to ”show­case” the com­pany to state-owned and large pri­vate com­pa­nies.

Delfin has been in talks with Chi­nese buy­ers for po­ten­tial off­take deals as well as funds for fi­nanc­ing, ac­cord­ing to a per­son with knowl­edge of the ex­changes.

A Chi­nese oil trad­ing ex­ec­u­tive in­volved in dis­cus­sions ahead of the trip ex­pected the del­e­ga­tion to yield sev­eral short-term sup­ply deals.

In May, the United States and China agreed to boost trade un­der the “100-day” trade talks aimed at re­duc­ing a US trade deficit with China that reached US$347bil last year.

Among the agree­ments is one al­low­ing Chi­nese buy­ers to pur­chase long-term sup­plies from the United States di­rectly.

Cur­rent long-term con­tracts with Qatar and Aus­tralia signed be­tween 2009 and 2013 will ex­pire around 2030/40, but China will need to top up im­ports to meet grow­ing de­mand.

Un­cer­tain when the global LNG mar­ket will bot­tom out, Chi­nese buy­ers are cau­tiously avoid­ing lin­ing up new long-term con­tracts, but rather are look­ing at sign­ing fiveyear or even shorter-term deals based on spot prices, sources said.

US im­ports of LNG have ex­ploded this year.

In the first nine months of the year, ship­ments hit al­most 600,000 tonnes, rank­ing the United States as the sixth largest LNG im­porter, leap-frog­ging Nige­ria and Peru.

The av­er­age price China paid for US LNG was US$7.62 per mil­lion of Bri­tish ther­mal units (mmBtu) over the past 12 months on a de­liv­ered ba­sis, com­pared to US$6.54 for Aus­tralia, ac­cord­ing to Reuters cal­cu­la­tions based on monthly cus­toms data.

In 2016, China im­ported just un­der 200,000 tonnes of LNG, up from 62,601 tonnes in 2015.

China ex­pects that gas de­mand will rise to be­tween 320 and 360 bil­lion cu­bic me­tres per year by 2020. The in­crease is the equiv­a­lent of the an­nual con­sump­tion of Ja­pan, Asia’s sec­ond-largest gas con­sumer after China. — Reuters

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