Wood Mackenzie on China's new retaliatory tariff on US LNG
Giles Farrer, research director, Wood Mackenzie:
In the 12 months up until June 2018, China was the second largest buyer of US LNG, accounting for approximately 3
The impact on the short-term
If China still needs to procure spot cargoes, we think that this is likely to result in a premium of up to 10% on supply from non-US, lean sources like the Australia East Coast projects, Tangguh, Gorgon or the Qatari Mega-trains. Chinese buyers' appetite to pay significantly higher prices for LNG from other sources may be limited by the price they can sell gas domestically.
For the long-term market, the consequences are likely to be felt on new supply developments. It restricts the target market for developers of new US LNG projects trying to sign new long-term contracts. However, there is still plenty of appetite for second wave US LNG projects from other buyers in Asia and Europe, as evidenced by recent contracting momentum at Freeport, Calcasieu Pass and Sabine Pass Train 6. The first wave of US LNG projects
It could also support development of other projects outside of the US targeting the Chinese market (including Russia pipeline projects), potentially allowing them to push for higher long-term contract prices. The recent deal between PetroChina and Qatar is evidence of this.
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