With China deal, U.S. poised for new LNG boom

The liquefied natural gas tanker Asia Vision left Cheniere Energy’s Sabine Pass export terminal in 2016 with the first cargo of U.S. shale gas. (Bloomberg photo by Lindsey Janies)

A new deal struck between China and the U.S. links the world’s largest liquefied natural gas growth market to the fastest-growing LNG exporter, and may encourage a new round of expansion along the Gulf Coast.

The U.S. Commerce Department announced yesterday a 100-day action plan between the U.S. and China that allows Chinese companies to negotiate long-term contracts to source LNG from U.S. suppliers. Energy research firm Wood Mackenzie said the deal has the potential to alter global LNG trade.

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WoodMac expects Chinese LNG demand to reach 75 million metric tons per year — or about $26 billion at today’s prices — by 2030, triple the current amount of LNG imports. “The U.S. is keen for a slice of the pie,” said Massimo Di-Odoardo, WoodMac’s head of global gas and LNG research.

The U.S. is already exporting LNG to China. In March it accounted for 7 percent of total LNG imports into the country, WoodMac said. China’s total LNG demand last year was 26 million metric tons.

“In the longer term, the deal paves the way for a second wave of investment in U.S. LNG,” Di-Odoardo said. “Developers will now be able to target Chinese buyers directly, potentially supporting project financing. It could also support direct Chinese investment into liquefaction and upstream developments on U.S. soil.”

The new deal also increases pressure on projects in Australia, East Africa, Canada and Russia.

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