Trade War Leaves LNG Mega Projects Vulnerable
The escalation of the trade war between the United States and China could jeopardize several LNG mega projects awaiting final approval.
That’s according to Rystad Energy, which said increased tariffs will create additional headwinds for U.S. LNG projects currently awaiting final investment decisions.
“Rystad Energy expects 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 U.S. projects as long as this trade war persists,” Sindre Knutsson, senior analyst at Rystad Energy’s gas markets team, said in a company statement.
“For example, Cheniere and Sinopec agreed late last year on a 20-year deal that would supply 2 million tons per annum of LNG to China starting in 2023. This deal could have been signed once the trade tensions were resolved, but due to the heightened tensions this has not happened,” Knutsson added.
According to Rystad Energy, China’s decision to impose tariffs on U.S. LNG will make LNG projects outside the United States more attractive.
On Monday, China’s ministry of finance revealed that the country would impose a 25 percent tariff on U.S. LNG from June 1. On May 10, the office of the United States trade representative revealed that the United States had increased the level of tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports.
According to a report published by DNV GL last month, the majority of LNG-focused oil and gas professionals believe several new LNG infrastructure projects will need to be initiated this year to ensure supply can meet demand after 2025.
DNV GL’s report drew upon a global survey of 291 senior LNG professionals, conducted in December 2018. The report also includes findings from DNV GL’s annual study on the outlook for the oil and gas industry, based on a survey of 791 senior oil and gas professionals, conducted during late October and early November 2018.
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