Shandong Order Group, a Chinese second-tier gas company, has signed a medium-term LNG supply agreement with Glencore Singapore, with pricing linked to Platts JKM.
This agreement, signed on 25th March in Beijing, is a move to secure clean energy resources amid China's efforts to reduce carbon emissions, the Chinese company said on its official website, without disclosing further details of the deal.
Trade sources told S&P Global that the contract involves the supply of three cargoes per year for three years on an ex-ship (DES) basis, with the contract price set at a discount to Platts JKM.
In 2024, the two companies were involved in trades, as Shandong participated in spot trading activity.
JKM has increasingly been adopted as a reference in Chinese term deals in recent years, Platts said. Notable examples included a contract signed by China National Offshore Oil Corp (CNOOC) and ADNOC in late 2023 for 12 cargoes to be delivered during the 2024/25, priced at a JKM discount.
In addition, JKM was incorporated into China's downstream city-gas pricing mechanism between 2022/24, with part of non-residential gas volumes linked to JKM prices.
"It is easier to hedge with JKM," a Chinese trade source said talking about the contract, highlighting the advantages of using JKM in risk management strategies.
Australian supplies
Glencore Singapore had also signed a medium-term LNG supply contract with Australia's Santos in September, 2024 for 19 cargoes or up to 500,000 tonnes per year of LNG for three years plus a quarter.
This contract was oil-indexed and was due to commence in the fourth quarter of this year.
The Shandong Order Group deal aligns with Glencore's broader strategy to penetrate China's LNG market through partnerships with second-tier gas companies, which are increasingly sourcing imported LNG through LNG terminals operated by state-owned infrastructure giant PipeChina, the Singapore based trader said.
In addition to Shandong, Glencore Singapore had also signed a medium- to long-term LNG sales and purchase agreement (SPA) with Chinese second-tier gas company, Shenzhen Energy Group, in July, 2024.
This calls for the supply of about 500,000 tonnes per year for five to 10 years, with pricing linked to Henry Hub. Deliveries were expected to begin in late 2026 or early 2027.
Based in Shandong province, the group primarily distributes city gas. It is involved in gas pipeline construction, LNG trading, distributed energy, and vehicle gas.
According to local Chinese media, its partnership with Glencore marks a shift toward securing direct LNG imports, reducing reliance on domestic suppliers, such as state-owned PetroChina and Sinopec.
