Beijing November 7 2021: China’s Sinochem has agreed to buy as much as 1.8 million mt/year of LNG from Cheniere Energy under a long-term deal.
The deal, which Cheniere announced Nov. 5, is the latest in a frenzy of fixed-fee term commercial agreements between US exporters and Chinese counterparties that have been reached in recent months, amid a spot price surge in European and Asian end-user markets.
Under the agreement between Sinochem and Cheniere’s marketing unit, the buyer will purchase an initial volume of about 900,000 mt/year in July 2022. That volume will eventually rise to 1.8 million mt/year over the course of the 17½ year term of the agreement, Cheniere said.
Sinochem, one of China’s four largest state-owned oil companies, will buy the LNG on a free-on-board basis for a price indexed to the US Henry Hub, plus a fixed liquefaction fee that Cheniere did not disclose.
Cheniere did not say whether the volumes would be tied to a specific liquefaction terminal or be covered by multiple terminals. It operates Sabine Pass Liquefaction in Louisiana and Corpus Christi Liquefaction in Texas. Next year, it expects to sanction an up to 10 million mt/year midscale expansion at the site of its Texas facility.
The Sinochem deal follows Cheniere’s Oct. 11 announcement that a subsidiary of China’s ENN Natural Gas had signed a 13-year deal to buy 900,000 mt/year of LNG, starting in July 2022, from the US exporter. Cheniere previously signed two long-term contracts with PetroChina for a combined 1.2 million mt/year of LNG. Only a small portion is in effect, with shipments on the balance starting in 2023.
Also, active signing term supply deals with Chinese buyers of late has been Venture Global LNG.
Sinopec and its trading arm, Unipec, have agreed to buy at least 7.5 million mt/year of LNG from Venture Global.
When those purchases take effect, Venture Global would overtake Cheniere as the biggest US supplier of LNG to Chinese counterparties on a term basis.
Some 4 million mt/year of the supply, for a 20-year term, will come from Venture Global’s proposed Plaquemines LNG export facility to be built south of New Orleans. According to Venture Global, another 3.5 million mt/year of supply, for a shorter term, is tied to its Calcasieu Pass terminal that is currently under construction in southwestern Louisiana. Sinopec pegged that commitment at 3.8 million mt/year.
