PetroChinas trading arm is looking to boost the flexibility of its LNG trading portfolio with supply from North America, a senior executive at the Chinese state-run oil and gas giant told Reuters on Tuesday.
LNG supply from U.S. LNG exporters typically doesnt have restrictions on destination, unlike volumes from Qatar, for example. The Middle Eastern LNG exporter, the second-largest in the world after the United States, prefers to sign long-term supply agreements with buyers with restriction clauses for where the LNG can be delivered.
Without a firm destination clause, LNG traders can resell cargoes to other regions at times of low demand or other circumstances on the market.
Earlier this year, the U.S.-China trade war prompted Chinas LNG buyers to resell the cargoes they were buying from the U.S. as Chinese tariffs on American goods were raising the costs of U.S. LNG imports.
If I look at our portfolio today, I think were slightly overweight on duration. I think we signed too many, very long term, take-or-pay SPAs (sales and purchase agreements), Zhang Yaoyu, Assistant CEO and Global Head of LNG and New Energies at PetroChina International, told Reuters.
The Chinese giants trading arm is actively working to de-risk supply with increased diversification of sources and flexibility in contracts, the executive added.
PetroChina International currently has more inflexible supply agreements than it would have liked and is interested in some North American volumes to boost destination flexibility, Zhang told Reuters.
Shell, the worlds top LNG trader, said in its annual LNG report earlier this year that global LNG demand is set to surge by 60% through 2040, pushed up by Asias economic growth. The other key drivers of LNG consumption growth will be the push for emissions reductions in heavy industry and transport, as well as the impact of artificial intelligence (AI) on power demand, according to the UK-based supermajor.
By Charles Kennedy for Oilprice.com
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