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CNOOC issues China's first 2023 LNG buy tender since Russia-Ukraine war: sources

Highlights

Number of cargoes sought flexible

Prices to be linked to Platts JKM

Tender scheduled to close Dec 14

  • Author
  • Staaff    Christel Goh
  • Editor
  • Jonathan Fox
  • Commodity
  • Coal Electric Power LNG Natural Gas

State-owned China National Offshore Oil Corporation has issued a limited participation tender to buy LNG cargoes, meant for delivery over February-December 2023, company sources told S&P Global Commodity Insights.

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CNOOC is the largest LNG importer in China. This is the first LNG buy tender from China since Russia invaded Ukraine, and is an important landmark as it indicates a revival of buying interest from China after demand stayed subdued for most of 2022, reflecting heightened pandemic-related curbs. However, the cargoes sought could also be resold overseas, contingent on local demand.

"We have chatted with our counterparties to see if they have any interest. There is no fixed number of cargoes we are looking for currently," a company source said, noting that the tender was issued Dec. 9 and will close on Dec. 14.

CNOOC plans to buy some 2023 delivery LNG cargoes to optimize its resource pool, a second company source said.

The price of the tender will be linked with the Platts JKM, the source said. The Platts JKM is the LNG benchmark price assessment for spot physical cargoes and is assessed by Platts, part of S&P Global.

"We will bring the LNG cargoes back to China if there is any demand in the domestic market, otherwise, we will sell it outside of China," the second company source said.

Having a market exercise through the tender would be helpful for CNOOC to gauge prices, a Singapore-based trader said.

Other industry sources concurred, noting that the tender might only be awarded if offers are reasonable, possibly at a discount to the Platts JKM.

"CNOOC could come out with more tenders if they expect downstream demand to improve following the easing of COVID-19 restrictions," a Chinese end-user said.

Some market sources said CNOOC may buy Northeast Asia LNG cargoes on a DES basis to China while selling its FOB US LNG cargoes to Europe, emulating a move that was adopted by Sinopec this year.

FOB cargoes have no destination restrictions and can be sold to places with higher prices, according to market sources.

Locking in supplies

As far as other sourcing is concerned, CNOOC Gas & Power Group Co., Ltd., a wholly owned subsidiary of CNOOC, signed two LNG sales and purchase agreements with US Venture Global LNG on Dec 21, 2021, S&P Global previously reported. One comprises buying 2 million mt/year of LNG for 20 years from Venture Global's Plaquemines LNG export facility, which will begin delivery after the project is launched.

The second is for the purchase of a total 1.5 million mt of LNG from Venture Global's Calcasieu Pass LNG facility over three years, with delivery starting from the second half of 2023, according to sources at CNOOC.

In addition, LNG supplies under the 15-year contract between CNOOC and Qatargas are also expected to increase in 2023 after the start of deliveries in 2022.

As a result, CNOOC's LNG contract volumes are estimated to be nearly 25.5 million mt in 2023, up around 6.9% from its contract volume of around 23.8 million mt in 2022, S&P Global calculations based on data and information collected from the market showed.

China is estimated to have around nine new LNG term contracts scheduled to start deliveries in 2023, six of which are from second-tier or privately owned importers, according to S&P Global calculations.