US-China Trade Balancing Struggle: China invests and buys US goods

[ceo_energemsier + 1,818]

Sempra, CTG sign first US-China LNG agreement since tariff implementation

 

 

 

Parent company Sempra Energy also announced an agreement to sell an 83.6% stake in the Peruvian Luz del Sur for $3.59 billion in cash to China Yangtze Power International, or CYP, a subsidiary of CTG, a company statement showed.

"This initial agreement with CTG represents an opportunity to support strong growth in natural gas demand in Asia, with future expansions of our LNG projects right here in North America," Jeffrey W. Martin, chairman and CEO of Sempra Energy, said.

EXTENDED TRADE TENSIONS PUT US SUPPLY ON HOLD

The agreement between Sempra LNG and CTG marks the first US-China LNG agreement in 12 months, following retaliatory tariffs first imposed by the Chinese Ministry of Commerce on US imports on September 24, 2018.

The initial 10% tariff on US LNG was further leveled up to 25% on June 1 as trade tensions escalated.

There were discussions in March between Sinopec and Cheniere for a potential long-term LNG supply deal on the premise of easing trade tensions, according to sources with knowledge of the matter.

As trade talks stagnated, Chinese LNG market participants were uncertain of the outlook surrounding US LNG amid a wave of global oversupply.

"While a trade deal has not yet to be reached [between US and China], it is unlikely that Chinese buyers would firm up agreements for spot or short term LNG supply at least," an end-user said.

US LNG suppliers might have to consider a long term scenario as this issue extends into a structural one, the same source said.

Prior to the US-China trade dispute, Cheniere had announced two sale and purchase agreements with CNPC in February 2018 for the supply of 1.28 million mt/year of LNG in two tranches till 2043.

PetroChina, a subsidary of CNPC, was reported to have diverted its US term cargoes this year through optimization and cargo swaps, according to market sources. The Chinese importer was heard to be taking only a handful of cargoes from Cheniere for the term deal, according to an industry source. Further details remain unclear.

To-date in 2019, China has received four cargoes, or 277,000 mt of LNG, from the US Sabine Pass LNG terminal, with three of these cargoes having been delivered to PetroChina's Rudong and Tangshan terminals over January-March, and one to CNOOC's Hainan LNG terminal in January. This is compared with 33 cargoes received from the US in 2018, totaling 2.32 million mt of LNG

[Ward Smith + 6,615]

There's something not right in the article. Sempra is a utility, and they owned a piece of a Peruvian utility, which they sold to a Chinese company. I can't suss out what the LNG connection is, nor what any of this has to do with tariffs. Even if tariffs were 1000%, I'm not seeing how that affects Peru and China. Is there a hidden contractual obligation on Luz del Sur to purchase LNG from a subsidiary of Sempra? That's the only way I can see to connect these dots. 

Here's the generic press release

https://www.prnewswire.com/news-releases/sempra-energy-announces-agreement-to-sell-stake-in-luz-del-sur-in-peru-300927430.html

[ceo_energemsier + 1,818]

19 minutes ago, Ward Smith said:

There's something not right in the article. Sempra is a utility, and they owned a piece of a Peruvian utility, which they sold to a Chinese company. I can't suss out what the LNG connection is, nor what any of this has to do with tariffs. Even if tariffs were 1000%, I'm not seeing how that affects Peru and China. Is there a hidden contractual obligation on Luz del Sur to purchase LNG from a subsidiary of Sempra? That's the only way I can see to connect these dots. 

Here's the generic press release

https://www.prnewswire.com/news-releases/sempra-energy-announces-agreement-to-sell-stake-in-luz-del-sur-in-peru-300927430.html

The tariffs being referred to are the Chinese tariffs on US goods and products, so their US LNG would be exposed to Chinese tarrifs not the Peruvian LNG supplies.

 

Sempra also does LNG plants and related infrastructure.

Sempra LNG

Sempra LNG develops, builds and invests in natural gas liquefaction facilities and is pursuing the development of five strategically located LNG projects in North America with a goal of delivering 45 million tonnes per annum of clean natural gas to the largest world markets, making Sempra Energy one of North America's largest developers of LNG export facilities.

Cameron LNG, a joint-venture LNG facility under construction in Louisiana, is expected to be one of the first U.S. liquefaction-export projects to commence operations in 2019. The company is also developing the proposed Port Arthur LNG liquefaction project in Texas and the proposed liquefaction-export facilities at the Energia Costa Azul receipt terminal in Ensenada, Mexico

 

http://www.sempralng.com/

 

[Ward Smith + 6,615]

Thanks @ceo_energemsier,that's good analysis. I should have been more clear that I was unimpressed with the MOU and was primarily focused on the only definitive agreement, the sale of the utility stake. The Chinese saying they'll maybe think about maybe buying some LNG maybe in the future doesn't float my boat much.  

Quote

Sempra Energy also announced today that its subsidiary Sempra LNG has entered into a memorandum of understanding with China Three Gorges Corporation (CTG), the ultimate parent company of CYP, regarding potential cooperation in supplying liquefied natural gas (LNG) to support demand growth in China, including the growth of natural gas power generation. Ultimate participation remains subject to finalization of a definitive agreement, among other factors.

 

 

Edited October 1, 2019 by Ward Smith