Exclusive-China looks to lock in U.S. LNG as energy crunch raises

By Chen Aizhu, Jessica Jaganathan and Scott DiSavino

SINGAPORE/NEW YORK (Reuters) – Major Chinese energy companies are in advanced talks with U.S. exporters to secure long-term liquefied (LNG)supplies, as soaring gas prices and domestic power shortages heighten concerns about the country’s fuel security, several sources said.

At least five Chinese firms, including state major Sinopec (NYSE:) Corp and China National Offshore Oil Company (CNOOC (NYSE:)) and local government-backed energy distributors like Zhejiang Energy, are in discussions with U.S. exporters, mainly Cheniere Energy (NYSE:) and Venture Global, the sources told Reuters.

The discussions could lead to deals worth tens of billions of dollars that would mark a surge in China’s LNG imports from the United States in coming years. At the height of a Sino-U.S. trade war in 2019, gas trade briefly came to a standstill. LNG export facilities can take years to build, and there are several projects in North America in the works that are not expected to start exporting until the middle of the decade.

Talks with U.S. suppliers began early this year but speeded up in recent months amid one of the biggest power-generating, heating fuel crunch in decades. Natural gas prices in Asia have jumped more than fivefold this year, sparking fears of power shortages in the winter.

“Companies faced a supply gap (for winter) and surging prices. Talks really picked up since August when spot prices touched $15/mmbtu”, said a Beijing-based senior industry source briefed on the talks.

Another Beijing-based source said: “After experiencing the recent massive market volatility, some buyers were regretting that they didn’t sign enough long-term supplies.”

Graphic: China’s natural gas imports since 2018: https://fingfx.thomsonreuters.com/gfx/ce/dwpkrrkwjvm/China%20gas%20imports%20since%202018%20and%20Asia%20spot%20prices.jpg

Sources expected fresh deals to be announced over the coming few months, after privately controlled ENN Natural Gas Co,, headed by the ex-LNG chief of China’s largest buyer, CNOOC, announced a 13-year deal with Cheniere on Monday.

It was the first major U.S.-China LNG deal since 2018.

The new purchases will also cement China’s position as the world’s top LNG buyer, taking over from Japan this year.

“As state-owned enterprises, companies are all under pressure to keep security of supply and the recent price trend has deeply changed the image of long-term supplies in the mind of leadership,” said the first Beijing-based trader.

“People may have taken the spot (market) as the key in the past, but are now realizing that long-term cargoes are the backbone.”

CHEAPER U.S. GAS

The sources declined to be identified as the negotiations are private.

Sinopec declined comment. CNOOC…