U.S., CHINA LNG INVESTMENT: $3.59 BLN

PLATTS - US-based Sempra LNG has entered into a memorandum of understanding with China Three Gorges Corporation, or CTG, for the supply of LNG -- the first US-China LNG agreement in 12 months following retaliatory tariffs imposed by the Chinese Ministry of Commerce on US imports last year -- according to a statement released by Sempra Energy on Monday.

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, cFlow, Platts trade flow software, showed.

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