China Secures Two Long-Term LNG Deals With U.S. Producer
A Chinese company has sealed two 20-year LNG purchase deals with Venture Global, which will see the latter supply two million tons of liquefied gas to China Gas Holdings annually, beginning in 2027.
The gas will come from Venture Global’s two projects in Louisiana, Reuters has reported, Plaquemines LNG and CP2 LNG. The Plaquemines LNG facility, currently in construction, will have a capacity of 20 million tons annually when completed. CP2 LNG will also have a nameplate capacity of 20 million tons, with peak capacity of 24 million tons, Venture Global said in a fact sheet.
The two contracts with China Gas Holdings add to one it signed with Energy Transfer for the supply of 700,000 tons of LNG annually over a period of 25 years, amid a rush among Chinese energy buyers to secure a long-term supply of liquefied gas.
Reuters notes that for Venture Global this is the third recent deal with a Chinese company: last year, the LNG developer signed one 20-year contract with state-owned energy major Sinopec for the delivery of 4 million tons of LNG annually, and another, with a Sinopec subsidiary, for the delivery of another 3.8 million tons per year.
China specifically, and Asia as a whole, is being watched by LNG producers as one certain demand growth region, alongside Europe. China is of special interest because, unlike many other Asian economies, it can afford LNG, even at current prices. These are down from last year’s highs but are still higher than before Russia invaded Ukraine.
According to one LNG tanker operator, prices will continue trending higher until 2025, driving U.S. LNG investment because of the arbitrage between global and local prices.
The CEO of Flex LNG said he expected Henry Hub prices to rise from below $3 per mmBtu now to some $5 by 2025, while Europe’s TTF benchmark and the Asian Japan-Korea Marker top $20 per mmBtu before retreating to $15, according to a conference call cited by Natural Gas Intelligence.
By Irina Slav for Oilprice.com
Why Is China Buying Up So Much U.S. Oil?
- China is on a global crude oil buying spree, snapping up oil from the U.S., U.A.E, Saudi Arabia and Russia.
- Ten supertankers are heading to the U.S. aiming to take advantage of a “remarkable, profitable arbitrage” opportunity sparked by President Biden’s SPR releases.
- The IEA noted in January that “China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain.”
One of the most important bull thesis for crude in 2023 is that China, having permanently shelved its zero Covid policies, will unleash a global buying spree as the Chinese economy sharply roars back to life.
On Tuesday, we got another indication of precisely that: Unipec, the largest oil trader in China and the trading unit of state-held refiner Sinopec, and PetroChina, the largest oil and gas producer and distributor in China, have both hired ten supertankers in March to haul US crude back to Asia, according to Bloomberg, citing people with direct knowledge of the matter.
Each vessel can transport a whopping 2 million barrels of crude. The people said that the loading of the tankers is expected to occur across US Gulf Coast terminals.
"Chinese buying activity of US barrels seems to be the hottest activity right now," Viktor Katona, a lead crude analyst at Kpler, told Bloomberg. He said Chinese firms are taking advantage of a "remarkable, profitable arbitrage" for US crude that has been suppressed because of President Biden's massive releases from the Strategic Petroleum Reserve (remember when China was buying SPR releases last year?).
The first indication of China embarking on a global buying spree of crude was last month. We pointed out Unipec was set to purchase at least 18 cargoes of Upper Zakum crude from Abu Dhabi in March.
Chinese oil demand is rebounding after the reopening of its economy. Traders are closely monitoring Chinese oil demand for hints at what's the next direction for benchmark Brent futures.
Data and analytics firm Kpler pointed out as many as 14 Very Large Crude Carriers are preparing to load from the US Gulf Coast to China in March. Katona noted this doubled the volume shipped over the last several years.
Saudi oil giant Aramco expects the Chinese reopening and a pick-up in jet fuel demand to lead to a rebound in global oil demand this year, Amin Nasser, the CEO of the world's biggest oil firm, told Bloomberg in an interview last month.
And the Chinese buying isn't limited to the US and Abu Dhabi. OilPrice said PetroChina and Sinopec are back on the market for Russian Urals and taking advantage of the deep discounts.
Here's something for oil bulls:
"China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain," International Energy Agency said last month.
Remember, we told readers this would happen as early as November in a note titled "China Quietly Boost Oil Imports In Preparation For Reopening."
By Zerohedge.com
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