Global research house Rystad Energy said the increasing vitriol in the trade war could delay approvals for new US LNG projects waiting on final investment decision and contracts with Chinese buyers.
“Most of these US projects need to secure long-term contracts in order to get financing for their development,” Rystad Energy gas analyst Sindre Knuttson said.
“[We] expect China to be one of the biggest contributors in sponsoring new LNG projects over the coming years, and there will be a reluctance to signing new deals with US projects as long as this trade war persists.”
This is a positive for Australian LNG.
Credit Suisse analyst Saul Kavonic
Mr Knuttson said late last year US-based gas group Cheniere Energy agreed to a 20-year deal to annually supply 2 million of LNG to Chinese state-owned company Sinopec starting in 2023 but this has been delayed.
“This deal could have been signed once the trade tensions were resolved, but due to the heightened tensions this has not happened,” he said.
“This means that non-US projects are more competitive in terms of break-even price and that China, therefore, could have greater bargaining power when negotiating new contracts.”
This may impact the forecast $US200 million global construction surge, with about 90 million tonnes worth of new LNG developments projects expected to reach a final investment decision and begin construction over the next two years.
Much of this new development was slated for the US, which is experiencing a shale gas boom.
Chinese LNG demand is forecast to soak up much of the increase, as it leaps from 53 million tonnes in 2018 up to about 93 million tonnes in 2025, making it the world’s largest gas importer
Credit Suisse energy analyst Saul Kavonic said the boon would benefit Australia as China looks for new, more stable sources of LNG.
«Overall, this is a positive for the marketing of Australian LNG,» Mr Kavonic said.
«US LNG is a competitor to Australia, so the tariffs work to take Australia’s main competitor out of the market.
«If you’re a Chinese buyer looking to sign a 20-year deal then you’re going to be wary of these [political] risks.»
Covering energy and policy at Fairfax Media.