US LNG exporter Cheniere has signed a long-term deal to supply liquefied natural gas to a unit of Chinese independent gas distributor ENN.
ENN LNG (Singapore), a unit of ENN Natural Gas Co, signed the contract with Cheniere Marketing during a ceremony on Monday.
Under the SPA, Cheniere’s marketing unit would supply about 0.9 million tonnes per year of LNG to ENN LNG on a free-on-board basis for a term of 13 years beginning in July 2022, according to a statement by ENN.
This marks ENN’s first long-term LNG SPA that is indexed to the monthly Henry Hub price, it said.
In addition, it is also the first long-term LNG deal since the completion of ENN Natural Gas’ major asset restructuring in 2020.
China’s gas demand continues to rise
Enn operates the Zhoushan LNG receiving terminal, China’s first privately-owned large LNG import facility, while Cheniere owns the Sabine Pass and Corpus Christi LNG export terminals in the US.
Cheniere’s chief executive Jack Fusco said in the statement that the new deal “further advances Cheniere’s commercial momentum and marks another milestone in our efforts to contract our LNG capacity on a long-term basis in anticipation of an FID of Corpus Christi Stage 3, which we expect will occur next year.”
On the other side, Wang Yusuo, chairman of the board of ENN Natural Gas said, “China is making great efforts to achieve the goal of peak carbon emissions and carbon neutrality, boosting the reform of natural gas market, and accelerating the structural adjustment of energy consumption.”
China’s natural gas demand continues to remain strong while its LNG imports surged this year, overtaking the world’s largest importer, Japan.
The average annual growth rate of natural gas consumption in China reached about 11 percent in 2020 and 2021, according to ENN. The firm says that China’s natural gas consumption would reach 550 to 600 bcm by 2030.
Recently, the Asian spot LNG prices surged to record highs, mostly due to surging European gas prices but also winter restocking demand among Asian end-users, including in China.
“Since the beginning of this year, due to the lagging of LNG production projects and low carbon transition of the energy structure, the supply of natural gas market is tight and the price is high,” Zheng Hongtao, president of ENN Natural Gas, said.
He said that through this cooperation with Cheniere, ENN would have resources linked with various indexes to further reduce procurement-related risks and optimize its resource pool.