China has signed a long-term agreement to import LNG that will be supplied from two installations in Louisiana operated by US company Venture Global.
China has signed a long-term agreement to import LNG that will be supplied from two installations in Louisiana operated by US company Venture Global. This marks the first LNG supply agreement signed by a US exporter with a subsidiary of state-owned China National Offshore Oil Corporation (CNOOC), China’s largest importer of LNG.
The signing of the agreement had been debated for months, but was not officially confirmed until a few days ago in a statement from Venture Global. Venture Global LNG and CNOOC Gas & Power Group Co. have entered into a 20-year agreement under which Venture Global will supply two million tonnes of LNG per year from its Plaquemines LNG export facility, in Plaquemines Parish, Louisiana. Also, CNOOC Gas& Power will purchase an additional 1.5 million tonnes of LNG from Venture Global’s Calcasieu Pass LNG facility for a “shorter term”.
The signing has recently received wide coverage in Chinese state media which hailed it as “a move which clearly shows that the first phase of the China-US trade agreement, which involves China’s increased purchase of US energy products, is being successively implemented”. It was highlighted that under phase one of the trade agreement, China agreed to increase US energy imports, including LNG, crude oil, refined products and coal, by $52.4 billion over two years above the 2017 baseline.
The deal is one of several recently that Chinese companies have entered into with US companies in order to increase the volume of LNG supplies to the country. Last year, Chinese energy provider Foran Energy Group decided to increase LNG supplies from US-based Cheniere Energy between 2021 and 2025, and last month the companies reached another agreement for 20 years, effective as of January 2023. Cheniere also announced a deal last month with China’s SinochemGroup Co. to supply LNG from July 2022. Heightened tensions between China and Australia have also undoubtedly had an impact on increased US LNG imports since Australia is China’s largest LNG importer, accounting for more than 40% of all LNG supplies.
China is thus becoming a key player in the market for LNG imports – many pundits expect that by the end of this decade over 75% of the world’s LNG will have been shipped to that country. The agreement concluded between CNOOC and Venture Global is also an important geopolitical event, indicating further normalisation of trade relations between the USA and China.