China Enters into Largest and Longest LNG Import Deal with U.S.
China has entered into the largest, long-term deal for the importation of U.S. LNG which will be supplied from two sites in Louisiana operated by Venture Global. According to the company, this marks the first LNG supply agreement signed by a U.S. exporter with a division of state-owned China National Offshore Oil Corporation (CNOOC), China’s largest importer of LNG.
The deal, which was first rumored in October, was confirmed with a statement from Venture Global and reported on the Department of Energy’s website. Venture Global LNG and CNOOC Gas & Power Group Co. entered into a 20-year Sales and Purchase Agreement. Under the terms of the agreement, Venture Global will supply two million tons per annum of LNG from its Plaquemines LNG export facility, in Plaquemines Parish, Louisiana. In addition, CNOOC Gas & Power will purchase an additional 1.5 million tons (MT) of LNG from Venture Global’s Calcasieu Pass LNG facility for “a shorter duration.:
“Venture Global is pleased to announce the expansion of our footprint in Asia through two new deals to supply the Chinese market with clean, low-cost US LNG,” said Mike Sabel, Chief Executive Officer of Venture Global LNG. “China is critical to global climate efforts, and LNG supplied by Venture Global will serve as an important addition to their low carbon energy mix for decades. This new long-term partnership with CNOOC builds on our company’s continued momentum in a very active 2021.”
Chinese state media also highlighted the agreement calling it a “move that clearly shows that the phase one trade agreement between China and the US, which covers China's increased purchase of US energy products, are moving forward.” They highlighted that under phase one of the trade deal, China agreed to increase energy imports from the U.S., including LNG, crude oil, refined products and coal, by $52.4 billion over two years above the 2017 baseline. Analysts had accused China to be slow in fulfilling its commitments under the Trump administration trade deal but in announcing this deal used it as an opportunity to call on the U.S. to “create a more favorable environment - both from the political and supply perspectives - for bilateral trade to further expand.” China is citing the LNG deal as it pushes for the U,S, to drop some of the tariffs imposed on its products during the recent trade war.
“As China’s largest LNG importer, CNOOC is committed deeply not only to the mission of securing China’s gas supply, but also to the climate goals of building a carbon-neutral China by 2060,” said Shi Chenggang, Chairman of CNOOC Gas & Power commenting on today’s press release detailing the agreement. “We are pleased to announce our long-term LNG cooperation with Venture Global. By signing the SPAs with Venture Global, CNOOC will be able to further improve its ability to meet China’s increasing gas demand, whilst providing solid support for China’s energy transition pathway to build a more ‘beautiful China’.”
This deal is one of several that multiple Chinese companies entered into with the U.S. to help build the country’s LNG supply. Last year, Chinese utility Foran Energy Group agreed to buy LNG cargoes from Cheniere Energy between 2021 and 2025. Last month, they entered to further agreement for 20-years starting in January 2023. Cheniere also reported a deal last month with China’s Sinochem Group Co. to supply LNG beginning in July 2022.