LNG

QatarEnergy is continuing to build the company's Chinese sales portfolio with yet another Sale and Purchase Agreement, this time with China’s S&T International Natural Gas Trading Co. for the supply of 1 million tonnes per annum over a 15-year period starting in late 2022.

“This agreement marks further expansion of our customer base in the People’s Republic of China, which can count on Qatar as a trusted and reliable energy partner,” said Saad Sherida Al-Kaabi, the President and Chief Executive of QatarEnergy.

“We are pleased to welcome S&T into our family of long-term LNG customers and we are excited to work with them to help fulfil their long-term LNG requirements,” added Al-Kaabi.

QatarEnergy said the LNG deliveries under the SPA would allow S&T to receive its volumes from Qatar’s fleet of vessels, primarily at the Tangshan import terminal located in Caofeidian Port in northeast Hebei Province.

The Chinese volumes would be produced at the Qatar Liquified Gas Company (II) project at Ras Laffan.

QatarEnergy had disclosed on December 7 that it had signed an SPA with Guangdong Energy Group based in southern China for the supply of 1 MTPA of LNG over a 10-year period starting in 2024.

Increasing volumes

With the conclusion of the S&T deal and the Guangdong Energy agreement, China will be supplied with around 17.5 MPTA of LNG from Qatar under long-term SPAs.

Deliveries under the Guangdong Energy SPA would be made to the Dapeng and Zhuhai receiving terminals on the Pearl River Delta.

Al-Saadi said that China was considered a major customer for the State of Qatar and a strategic partner in the energy sector.

Other supply deals with China have been previously arranged, though a landmark accord was reached in September 2021 when QatarEnergy signed an SPA with China National Offshore Oil Corp. for the supply 3.5 MTPA over a 15-year period starting in January 2022.

That SPA was signed during a virtual ceremony involving Al-Kaabi and Wang Dongjin, the Chairman of CNOOC.

QatarEnergy signed a previous deal in July 2021 in the form of 10-year SPA with Shell for the supply of 1 MTPA of LNG to China.

Beijing Gas, the growing liquefied natural and pipeline supplier, maintained substantial revenues in the first half of 2020 while profits fell as the company said it was advancing its LNG import projects in Tianjin and Tangshan.

The Northern Sea Route (NSR) from Arctic Russia to North Asia has reopened earlier than in recent years, providing scope for LNG shipments to be re-directed from the Atlantic Basin to Pacific Basin as prices remain low, though are rising faster in Asia.

The NSR is officially defined by Russian legislation as lying east of Novaya Zemlya archipelago and specifically running along the Russian Arctic coast from the Kara Sea to the Bering Strait to enter the Northern Pacific Ocean.

The 172,600 cubic metres capacity Arctic-class LNG carrier “Christophe de Margerie” left the Yamal LNG export plant in Northern Siberia, operated by Novatek, on May 18 and is scheduled to arrive at the Chinese Tangshan import terminal on June 11 after a transit of 23 days.

The Tangshan terminal is in the northern Chinese Hebei province and is operated by PetroChina.

Shipping data shows that the “Christophe de Margerie” is accompanied by another tanker and two nuclear-powered ice-breakers, the “Yamal” and the “Vaygach”.

It is only in recent years that the NSR has started to be used earlier by LNG carriers pushing ahead to deliver cargoes to North Asia.

The 172,600 cubic metres capacity LNG carrier “Vladimir Rusanov” was the first vessel to use the NSR in 2019, having lifted a cargo at the Yamal plant in mid-June.

However, the “Vladimir Rusanov” is in Western European waters and scheduled to discharge a cargo on May 24 at the Montoir-de-Bretagne terminal in Western France.

According to analysts, the early availability of the NSR, coupled with a slowly opening Europe-Asia LNG arbitrage window - at historically low values - will result in a redirection of many Yamal cargoes away from Europe and to be pointed at North Asia.

Three other carriers are currently heading back to the Yamal plant's port at Sabetta from Europe and at least one could lift an Asia cargo.

They are the two 172,000 cubic metres capacity vessels, the “Georgiy Brusilov” and the “Vladimir Vize”, and the 172,600 cubic metres capacity carrier “Vladimir Voronin”, with arrivals scheduled before the end of May, according to shipping data.

The re-opening of the NSR comes as the Platts Japan-Korea Marker spot cargo price for North Asia cargoes for July is at $2.280 per million British thermal units and at $2.425 per MMBtu for August, higher than several weeks ago.

That’s as the European LNG price indicators, the UK National Balancing Point and the Dutch Title Transfer Facility, were lower at the equivalents on May 20 of $1.40 per MMBtu and $1.55 per MMBtu respectively.

There is currently a wider debate in Russia about accommodating much more energy shipping traffic on the NSR as usage increases.

Russian oil company Rosneft is progressing with the development of its Vostok Oil Project, a venture that is projected to deliver 25 million tons of shipments from a special seaport via the NSR by 2024.

The oil project is based on the development of several fields, including at least three in the Vankor area.

Vostok Oil will also include the development of 15 new industry towns, two airports and about 800 kilometres of new pipelines.

The traditional NSR that has been the main reference point in Russian Arctic shipping is now being debated by the government.

Growth in shipments on a wider route have been rising. Russian government data shows that in 2019, a total of 31.5 million tons of shipments were transported on the NSR, an increase of over 55 percent from 2018.

Most of the extra shipments were LNG from the Yamal plant.

Now the Russian government is referring to the Northern Sea Transport Corridor and has drawn up a report on increasing traffic volumes.

According to the Association of Sea Trade Ports, the transport corridor will be clearly referred to in the new Russian Arctic Strategy, a document that now awaits approval by the government.

The document has been written by the Russian Ministry of the Far East and Arctic and was submitted to the government on 7th of May 2020. The strategy covers the period until 2035.

Chinese LNG imports dropped last month but were higher than in the previous month with deliveries from nations such as Australia, Qatar and Papua New Guinea helping China surpass its full-year 2018 total in just 11 months.