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More US LNG headed to China amid disclosure of Venture Global-Unipec deal

Highlights

Three-year agreement tied to Calcasieu Pass

1 million mt/year to be delivered free on board

The trading arm of China's Sinopec has agreed to a short-term deal to buy 1 million mt/year of LNG from Venture Global LNG's Calcasieu Pass liquefaction terminal that is under construction in southwest Louisiana, a letter from the operator to the US Department of Energy that was made available Oct. 21 said.

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The three-year deal, signed Sept. 18 but just now disclosed, adds to a recent blitz of commercial activity between US exporters and Chinese buyers amid volatile Asian and European prices that remain high, though down from record levels seen earlier in October.

On Oct. 19, DOE made public a letter from Venture Global stating that it had signed two 20-year deals with Sinopec -- one for 2.8 million mt/year of supply and the other for 1.2 million mt/year of supply – that are tied to Venture Global's proposed Plaquemines LNG facility that is to be built south of New Orleans. Cheniere Energy said Oct. 11 that a subsidiary of China's ENN Natural Gas had signed a 13-year deal to buy LNG from the US exporter.

Venture Global has not issued announcements on any of its China deals. A spokesperson declined to comment Oct. 21.

According to Venture Global's letter to DOE about Unipec, formally known as China International United Petroleum & Chemicals Co., LNG supplies under the contract are to be delivered on a free-on-board basis. Pricing terms were not disclosed in the portion of the letter that was released.

The obligations to sell and deliver, and to take and pay for, LNG under the contract become effective on the later of the commercial operation date of the Calcasieu Pass facility and March 1, 2023, provided that certain conditions are satisfied, the letter, dated Oct. 1, said.

Venture Global's 10 million mt/year Calcasieu Pass facility is being built using modular trains that are smaller than the traditional liquefaction units used at other US facilities. The modular trains are being constructed in Italy and delivered to the site and plugged in one at a time.

Earlier in 2021, Venture Global said it plans a phased operational startup and that it could begin production and exports by the end of 2021. That would be a year earlier than originally anticipated. More recently, however, the operator has not provided an update on construction progress at Calcasieu Pass. Venture Global has previously said full operations at the export terminal were expected in mid-2022.

Venture Global also has long-term contracts to support Calcasieu Pass with Royal Dutch Shell, Italy's Edison, Portugal's Galp, Britain's BP, Spain's Repsol and Poland's PGNiG

Besides the ENN Natural gas contract, Cheniere previously signed two long-term contracts with PetroChina for a combined 1.2 million mt/year of LNG. Only a small portion is in effect, with shipments on the balance starting in 2023.

Extreme volatility in global gas markets is expected to spur more deals for US LNG supplies, based on the significantly cheaper input costs for feedgas and the destination flexibility of long-term contracts.

The S&P Global Platts JKM spot Asian LNG price rose to a record high of $56.33/MMBtu Oct. 6, while the TTF day-ahead contract in Europe reached a high of $39.50/MMBtu Oct. 5. On Oct. 21, JKM for December was assessed at $34.34/MMBtu, while Platts assessed TTF for December at $29.942/MMBtu.