First shipment of US LNG to China in more than a year nears destination

Houston — The first shipment of US LNG to be delivered to China in more than a year could arrive this week, S&P Global Platts trade flow software cFlow showed.

The approaching milestone follows import tariff exemptions that China has granted. At least six tankers that loaded on the US Gulf Coast in March and early April are currently on their way to China, according to cFlow and market sources.

Even amid weak prices in end-user markets and depressed demand due to the coronavirus pandemic, utilization at the six major US liquefaction terminals remains robust, with almost 9 Bcf/d of feedgas flowing to the facilities on Monday, S&P Global Platts Analytics data showed. The resumption of Chinese deliveries will help with optionality. No US LNG has been delivered to China since March 2019, amid tariffs of 25% that Beijing imposed on American cargoes in retaliation for US duties on Chinese goods. China started to offer a limited number of exemptions on certain commodities, including LNG, after an initial trade deal between the two countries was announced in January.

The BP-chartered Maran Gas Vergina, which loaded at Freeport LNG in Texas, was scheduled to arrive in China on April 19, according to a market source with direct knowledge of the current plan. Right behind it, the RWE-chartered Palu LNG, which loaded at Cheniere Energy's Corpus Christi Liquefaction in Texas, was expected to arrive April 22, cFlow showed.

The Cool Explorer, which is under charter to Cheniere and loaded at the exporter's Sabine Pass terminal in Louisiana, was on course to arrive in China on April 24. It will be followed on April 29 by the Total-chartered SK Resolute, which loaded at Sempra Energy's Cameron LNG in Louisiana, and on May 5 by the Naturgy-chartered Hoegh Giant, which loaded at Sabine Pass. Joining the group on Monday was the Cheniere-chartered Arwa Spirit, which loaded at Corpus Christi Liquefaction and showed a scheduled arrival in China on May 8, according to cFlow.

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Other tankers that loaded on the US and don't yet show captain's destinations also could be headed to China. At least two that were positioned in waters off China on Monday were showing "for orders," which means either the offtaker was keeping the destination private until the cargo arrives where it is going or a destination had not yet been determined. LNG tankers often change destinations or wait until late in their voyage to be assigned a destination, as offtakers search for the best netback.

How much volume China can absorb is a pressing question among market participants, as North Asian spot LNG prices remained unchanged Monday. The Platts JKM for May was assessed steady at $2.35/MMBtu, on stable pricing indications. Reports of more cargo deferments and a possible extension of the lockdown in India due to the coronavirus further dampened bearish sentiment.

The market will soon get a better idea of the challenges US LNG exporters face in finding homes for their cargoes. Cheniere is scheduled to release its latest financial results on April 30. In the weeks ahead, other exporters, including Dominion Energy, Sempra and Kinder Morgan, will also release earnings results for the January-March quarter and their outlooks for the rest of the year.