US economy

Cheniere bets on Chinese demand for US gas exports

Asian demand for natural gas is set to drive growth in the LNG industry for “decades to come”, even as the world reduces its dependence on hydrocarbons, one of the biggest US exporters of the fuel has predicted.

Anatol Feygin, chief commercial officer of Cheniere Energy, said the company expected to approve a $7bn expansion to its liquefied natural gas facility in Texas next year to meet surging demand for LNG cargoes in China and Japan that have pushed gas prices to record highs.

“We think that Asia is the growth driver for our industry for LNG demand for decades to come, and China is the single biggest piece in that,” Feygin said.

Cheniere’s investment in Texas is one of several new LNG projects in the US set for approval as companies rush to bring on more supply.

The vote of confidence in long-term demand for the super-chilled fuel signals a rare area of potential growth for the oil and gas industry, which is otherwise under pressure to run down assets as the world shifts to cleaner fuels.

To reach net zero carbon emissions by 2050 the International Energy Agency has forecast natural gas demand would need to peak in the late 2020s and fall by more than 5 per cent a year in the 2030s. Under that scenario, no new gasfields are required and many of the LNG facilities currently under construction or in planning are not needed, according to the IEA.

The global LNG trade would peak in the “mid-2020s” but demand will continue to rise until at least 2030 in countries such as China where gas will replace coal, the agency has said.

While coal is still by far the largest source of electricity generation in China, the government has been investing heavily in domestic gas infrastructure as part of a first phase of efforts by Beijing to combat air pollution and reach net zero carbon emissions by 2060.

“The infrastructure commitment that China is making from a capital investment, but also from a policy and regulatory standpoint to gas, is very substantial,” Feygin said, adding that Chinese demand alone had the potential to “double” Cheniere’s business.

A pioneer of US liquefied gas exports, Houston-based Cheniere signed the first ever long-term contract to supply American LNG to China in 2018. Further US-China LNG deals then stalled as Washington clashed with Beijing in a trade spat that resulted in tit-for-tat tariffs on everything from gas to musical instruments.

Cheniere signed its second long-term Chinese supply contract this week, a 13-year agreement with a subsidiary of China’s ENN Natural Gas. The deal came as another US exporter, Venture Global LNG, revealed it had signed three long-term supply deals with state-run Sinopec that will more than double China’s imports of American natural gas.

European buyers had historically signed similar deals but were unlikely to want such long-term contracts any longer given “uncertainty” over the speed of the transition away from hydrocarbons, Feygin said. Nevertheless, he predicted they would still need “medium-term” supply.

“Europe is actually going to have very robust imported gas demand in the 2020s and 2030s driven by displacement of dirtier fuels, [and] the symbiosis that we think we’ll see for decades to come between natural gas and renewables,” he said.

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