China's Petrochemical Industry (PetroChina Company Limited) is exploring long-term contracts for the supply of liquefied natural gas (LNG) from the United States. This move comes as the Iran war disrupts global energy transportation, and China seeks to diversify its gas supply sources.
Initial Talks with American Companies
According to published reports, American company Venture Global is in initial discussions to establish long-term contracts with at least three Chinese liquefied natural gas importers, including China's petrochemical industry. The liquefied natural gas in question will be sourced from this company's export facilities in Louisiana. Based on released information, the volume of supply being discussed with China's petrochemical industry is estimated to exceed one million tons per year.
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Impact of War on the Energy Market
Increased uncertainty in the global energy supply chain due to the U.S.-Iran war has been cited as a reason that has rekindled Chinese companies' interest in sourcing liquefied natural gas from the United States. China is looking to diversify its sources, and in this context, last month, China Gas Holdings signed a 20-year liquefied natural gas purchase agreement with Venture Global. Under this contract, China will receive 500,000 tons of liquefied natural gas weekly from the U.S. starting in 2030.
Additionally, negotiations are ongoing between the U.S. and Chinese governments regarding the resumption of U.S. liquefied natural gas trade. Prior to Chinese President Xi Jinping's visit to the United States, the two countries discussed options for reducing or eliminating China's tariffs on U.S. liquefied natural gas. However, no specific actions have been announced in this regard.
In this context, if negotiations between major Chinese liquefied natural gas importers like China's petrochemical industry and Venture Global lead to actual long-term contracts, it is expected that Chinese companies' efforts to secure U.S. liquefied natural gas will expand further. However, given the retention of the 15% tariff imposed on U.S. liquefied natural gas, the possibility of tariff reductions is seen as a variable influencing the expansion of liquefied natural gas trade between the two countries.
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