Sinopec to review $16 billion gas deal - GulfToday

Sinopec to review $16 billion gas deal


An oil refinery of Sinopec in Hefei, China. Reuters

China’s Sinopec, expected to be the next major Chinese buyer of US liquefied natural gas (LNG), is planning to review terms of a potential $16 billion supply deal with Cheniere Energy after a sharp drop in LNG prices.

That could delay sign-off on a deal that would help Beijing meet ambitious targets it set for US energy purchases in a Phase 1 trade agreement it signed with the United States.

Sinopec and Texas-headquartered Cheniere had been expected to sign the 20-year deal once a trade truce was reached between Beijing and Washington. Sinopec declined to comment, while Cheniere did not respond to a request for comment.

“The deal will be renegotiated over delivery terms and price,” said an industry executive with knowledge of the matter, who declined to be named as the matter is not public. “It may not be tough, but will take time.”

Another source familiar with the talks said many items needed to be reviewed as US gas prices have more than halved since late 2018.

“Sinopec is talking to several other US suppliers,” said the second source. “It’s really not clear at this stage what will come out.”

The firm, as one of the few state buyers with appetite to sign new multi-year LNG supply deals, also needs to lobby Beijing to remove or rebate a 25% tariff that has made US imports uneconomical in the past year, one of the sources said.

Sinopec, which plans to more than double its LNG receiving capacities to 41 million tonnes by 2025, emerged last year as China’s biggest spot buyer of LNG, as it is a much smaller purchaser under long-term deals than PetroChina or CNOOC.

As they are already committed to other long-term contracts, those two firms are much less likely to seek new supply agreements with US exporters.


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