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Natural gas market eager for China’s next move

China is the thread that keeps the gas wheel spinning.

That’s a key takeaway from this year’s CERAWeek by IHS Markit conference that wrapped up Friday in Houston.

The world’s most populous nation is expected to surpass Japan within the next decade as the biggest importer of LNG. Developers of liquefaction terminals on the US Gulf and West coasts are depending on that forecast as they scurry to sign offtake contracts and secure financing or equity partners for their projects.

There are risks, from price volatility to trade tensions to geopolitical concerns. There’s also competition for the market, from other countries and other fuels. Producers, traders and investors have reason for optimism, but they were also told at the conference to not be hasty.

“China’s impact is very significant and it’s something that we watch closely,” Hendrik Gordenker, executive chairman of Jera, a joint venture of Tokyo Electric Power and Chubu Electric Power and as such a major buyer of LNG, said during a leadership dialog.

But, he quickly added, “I would caution the LNG industry not to make linear extrapolations of Chinese LNG demand based on what you’ve seen in the last two years. I think China will continue to grow, but China has a lot of choices in terms of energy.”

Be proactive, not reactive, he said. He also had another piece of advice for US LNG export bulls. Be mindful of history.

“The industry has been characterized by feast or famine, huge waves up or down,” Gordenker said.

Between the martinis and endless buffets of eggs and sausages and salmon and pasta, along with the breakout sessions, panel discussions with global energy ministers and private meetings, talk of China kept coming up among the 5,300 participants, a new record for the conference.

How will clean air goals impact the demand expectations? What about coal? And, of course, tariffs. How long will the duties on imports of US LNG last? Could they go higher?

There was no shortage of speculation, or head-scratching. Some projects have had difficulty signing long-term contracts with Chinese counterparties. Others continue to be in talks, with hope of firming up deals in the weeks and months ahead. Cheniere Energy, which owns two of the three major US LNG export terminals currently in operation, is said to be in talks with China ‘s state-run Sinopec about a long-term supply agreement, with the parties awaiting further instructions from government authorities about a trade resolution.

Despite all the focus on China, Tellurian’s Charif Souki doesn’t seem worried.

“Frankly, I don’t care,” the chairman of the Driftwood LNG terminal developer said during a chat with reporters. “What they tell us is, ‘We’re very interested, but not yet.’ They are not going to explain to us why they are doing what they’re doing. When they’re ready, they’re going to tell us they’re ready.”

In the meantime, he said, “They come, they do their due diligence, they kick the tires.”
Source: Platts

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