The head of a U.S. LNG trade group said the sector is optimistic in the wake of the U.S. presidential election that lowered trade tensions between Washington and Beijing will encourage greater flows from the U.S. to China. The group said a shift in trade policy could foster an improved environment for negotiating supply deals that U.S. developers need to commercially sanction their projects.
Charlie Riedl, the executive director of the Center for Liquefied Natural Gas trade group, pointed to recent progress on the commercial front between Cheniere Energy Inc. and a Chinese LNG buyer as evidence. China's Foran Energy Group Co. Ltd. and Cheniere on Nov. 6 confirmed signing an agreement that called for negotiating a five-year supply deal by the end of the year that would likely include 26 shipments of LNG starting in 2021.
"It's not surprising to see an announcement between a U.S. supplier and a Chinese buyer shortly after the election, just to make that demonstration that they are still willing to do business with the United States, especially after a president-elect has been named that isn't Donald Trump," Riedl said Nov. 11 during an LDC Gas Forums event in San Antonio and on a webcast.
Riedl's comments came as investors pushed shares of U.S. LNG exporters higher in the wake of the election results.
The D.C.-based trade group was taking a wait-and-see approach on other several other regulatory issues that could impact the LNG sector during the new presidential administration, especially as the makeup of the next U.S. Senate remains uncertain. But trade policy in the incoming administration was a top concern.
China is expected to become the world's biggest importer of LNG by the end of the decade, making it a critical market for liquefaction terminals in the U.S. Before the pandemic, the U.S. was on its way to potentially becoming the world's biggest LNG exporter within the same time frame. But the tit-for-tat tariffs that began in 2018 between the two countries hampered negotiations over any long-term supply deals between U.S. LNG exporters and Chinese buyers.
The Center for Liquefied Natural Gas said it would watch how the Democrat President-elect Joe Biden will handle a Phase 1 trade deal that the Trump administration struck with China in early 2020, before the coronavirus pandemic took hold. The deal lead to the end of a 13-month-halt in U.S. LNG deliveries to China in April. But China's LNG purchases have fallen significantly short of targets under the deal.
Analysts generally do not expect any major warming of trade ties with China under a Biden administration but have predicted that a Biden victory could lessen the risk of worsening relations. As a candidate, Biden said he would remove the tariffs on Chinese goods.
Riedl said he did not anticipate large volumes of U.S. LNG flowing to China once Biden assumes the presidency but that there could be incremental increases during Biden's first few years in office amid renewed trade negotiations.
"It will signal that there is an opportunity to come back to the table and begin those negotiations again," Riedl said.