US gas exporters rush to sell LNG to China

Source:Reuters-Global Times Published: 2017/10/29 17:23:40

Move comes as world’s third-largest buyer commits to clearer skies campaign


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 in long-term 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 a 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 US.

"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 50 miles off the coast of Louisiana.

Current long-term contracts with Qatar and Australia signed between 2009 and 2013 will expire around the 2030-40 period, 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 five-year 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 tons, ranking the US as the sixth largest LNG importer, leapfrogging Nigeria and Peru.

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

In 2016, China imported just under 200,000 tons of LNG, up from 62,601 tons in 2015. China expects that gas demand will rise to between 320 and 360 billion cubic meters per year by 2020.



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