Largest U.S. LNG Supplier Cheniere Inks Marketing Deal with Chinese Customer

The United States has become the world's largest liquified natural gas exporter. Photo: Dan Macy

The Lede: U.S. liquefied natural gas producer Cheniere Energy signed a long-term contract to supply LNG to China’s ENN Energy Holdings in the company's second major LNG deal with ENN since the U.S.-China trade war began.

What We Know:

Cheniere Energy announced that its subsidiary, Cheniere Marketing has entered into a long-term 20-plus year LNG sale and purchase agreement (SPA) with EEN LNG.
ENN has agreed to purchase approximately 1.8 million tons per annum (mtpa) of LNG from Cheniere on a free-on-board (FOB) basis indexed to the Henry Hub price plus a fixed liquefaction fee. Deliveries will begin in mid-2026, reaching 0.9 mtpa in 2027. The latter 0.9 mtpa is subject to Cheniere’s positive final investment decision regarding the Sabine Pass Liquefaction Expansion Project in Cameron Parish, Louisiana.
In the previous week, Cheniere also entered into a long-term LNG SPA with Norway’s national oil company Equinor ASA for the purchase of 1.75 mpta for a 15-year term.

The Background: Cheniere is the largest U.S. producer of LNG and has made agreements with other Chinese energy companies. Cheniere and ENN signed their first 0.9 mtpa SPA in October 2021 which commenced a 13-year deal for the Chinese company to buy LNG beginning in July 2022. That deal was the first major binding agreement for natural gas between the U.S. and China since a trade war that halted gas deals between the two countries. The U.S. has become the world’s largest LNG exporter as demand for gas has increased significantly, particularly in Europe, due to Western sanctions in response to the Russia-Ukraine War. Political unrest in Russia in the past week has pushed up the price of European natural gas.

Likely Outcomes:

Cheniere has been able to navigate the geopolitical competition between the U.S. and China in recent years. China’s economic and climate goals mean that its energy companies will continue to purchase LNG from as many sources as they can. LNG deals have been made in recent weeks with Qatar and Tanzania. China would be prudent to diversify LNG sources in various geographic jurisdictions.
The potential for the largest U.S. LNG company to secure lasting SPA deals with China will likely continue as long as tensions do not escalate further. However, if the diplomatic or military rivalry flares up in the Indo-Pacific between the two superpowers, U.S. policymakers may put LNG sales to China on the table to ratchet up the pressure.
The trans-Atlantic LNG supply lines will likely remain lucrative as the sanctions on Russia continue. However, European countries may also consider other LNG sources as a ‘de-risking’ measure.

Quotables:

“We are pleased to build upon our existing long-term relationship with ENN, a leader in China’s rapidly growing natural gas industry, with this 20-plus year agreement signed today. This SPA further supports China’s structural shift to natural gas as a growing primary energy source, powering its economy while enabling improved environmental performance with flexible, reliable and cleaner LNG. This SPA accelerates Cheniere’s commercial momentum on the SPL Expansion Project, demonstrating the market’s need for additional LNG capacity, and the value of Cheniere’s unique capability to tailor long-term solutions for customers worldwide.” - Jack Fusco, President and CEO of Cheniere Energy

“At present, China is moving forward with the implementation of ‘carbon peaking & carbon neutrality,’ further accelerating the energy transformation, and China’s natural gas market is full of potential…The signing of this long-term SPA marks another milestone in the establishment of good strategic cooperation between two parties, contributes to ENN Natural Gas’ establishment of an intelligent ecological operator in the field, provides customers with quality services and resources, and promotes the low-carbon transformation and upgrade of all industries.” - Wang Yusuo, Chairman of the Board of ENN Natural Gas

Good Reads:

Cheniere And China’s ENN Energy Lock In 20-Year LNG Deal (Oil Price)

Cheniere and ENN Sign Long-Term LNG Sale and Purchase Agreement (Cheniere)

Cheniere CCO Says They Always Talk to China (Bloomberg)