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China inks first term deal for US LNG since trade war erupted
[SINGAPORE] China inked its first term deal to buy liquefied natural gas (LNG) from an American exporter since the trade war disrupted deliveries, a sign of confidence that relations with the US could be normalising.
Foran Energy Group said it signed a framework agreement with US producer Cheniere Energy to purchase 26 cargoes between 2021 and 2025. The deal was made during the annual trade fair in Shanghai, a signature project of President Xi Jinping designed to showcase China's openness to the world. Prices will be linked to the US Henry Hub benchmark.
Chinese firms had stopped signing longer-term supply contracts with US exporters after Beijing slapped tariffs on shipments in retaliation to US levies on Chinese goods in 2018. A long-negotiated supply deal between Cheniere and Sinopec, China's refining and petrochemicals giant, never materialised due in part to the trade spat.
American LNG sales to China stopped completely between May 2019 and March this year. Imports have since resumed as Beijing looks to honour its commitments to the Phase One trade deal signed with Washington in January, even as broader political relations between the world's two largest economies have been stretched almost to breaking point.
Earlier this year, China introduced a tariff waiver programme that included LNG in a bid to increase imports. But China's largest buyers have been uneasy about making long-term pledges in case relations with Washington were to suddenly sour.
Cheniere sent nine LNG cargoes to China between March and August of this year, US Department of Energy figures show.
The company's deal with Foran comes shortly after the PipeChina natural gas project was completed in the third quarter. The pipeline system allows third-party access to Chinese LNG terminals and natural gas pipelines, Cheniere executive vice-president and chief commercial officer Anatol Feygin said during a Friday investors call.
"It's in a great market in South China for us that we can access and continue to support," Mr Feygin said. "We do not see this as a one-off. We think this as a whole cadre of companies that we can engage with for years and look forward to continued success and continued traction there."