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PetroChina LNG purchase deal with Qatar bypasses US tariff threat

Thu 13 Sep 2018 by Mike Corkhill

PetroChina LNG purchase deal with Qatar bypasses US tariff threat
Bu Samra discharges a cargo at PetroChina’s Rudong terminal; Qatar already has one long-term SPA in place with the Chinese company

Qatargas has signed a sale and purchase agreement (SPA) with PetroChina under which it will supply the company’s Chinese terminals with around 3.4M tonnes per annum (mta) of LNG over a period of 22 years.

Qatargas is the world’s largest LNG-producing company and is responsible for marketing Qatar’s entire annual production capacity of 77 mta. For its part, PetroChina is China’s largest gas supplier, meeting 66% of China’s demand in 2017 through a combination of LNG imports, pipeline gas imports and domestic gas production.

Under the 22-year SPA, which extends to 2040, Qatargas will supply LNG from the Qatargas 2 project, a joint venture between Qatar Petroleum, ExxonMobil and Total. Shipments from Qatar’s Ras Laffan terminal will be directed to the three PetroChina LNG receiving terminals at Dalian, Tangshan and Rudong. The three facilities have an aggregate capacity of 13 mta.

The first shipment in what is PetroChina’s largest-volume SPA to date is due to arrive in China later this month.

China’s LNG imports have surged 35% year-on-year in the first eight months of 2018. The performance follows on from last year, when Chinese LNG imports reached 39.1M tonnes, a 42.4% jump on the 2016 volume.

Combining LNG and pipeline gas imports, China is poised to overtake Japan as the world’s biggest buyer of natural gas. If the transition does not quite occur this calendar year, it is set to happen in 2019 and the latest PetroChina SPA with Qatargas is a key element in China’s growing commitment to natural gas in its energy mix.

The Qatar/PetroChina contract must also be seen in the context of the trade wars US President Trump appears intent on fostering. In response to increased tariffs that the White House is imposing on certain Chinese imports, Beijing has threatened a 25% surcharge on imports of US LNG.

Developers of the new liquefaction plants currently under construction in the US regard the growing Chinese LNG import market as particularly attractive, but their hopes of sales to the People’s Republic could be stymied by a bilateral trade war. China, meanwhile, is looking at a full range of suppliers worldwide, existing and potential, to meet its LNG needs.

PetroChina itself is favouring increased purchases from Qatar, Russia and Australia in particular. The state-owned company already has one long-term SPA in place with Qatar.

The deal covers the supply of 3 mta from the Qatargas 4 project for 25 years, covering the 2011-2036 period. Cargoes are discharged at the PetroChina terminals on a delivered-ex-ship basis.

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