PetroChina said to mull suspending US LNG purchases

TOKYOPetroChina Co Ltd may temporarily halt purchases of US liquefied natural gas (LNG) spot cargoes through the winter to avoid potential tariffs amid a trade conflict between the US and China, according to people with knowledge of the strategy.

Under the plan, PetroChina would boost buying of spot cargoes from other countries or swap US shipments with other nations in East Asia, to avoid paying additional tariffs, said the people, who asked not to be identified because the information isn’t public.

PetroChina, a unit of the stateowned China National Petroleum Corp, couldn’t immediately comment when contacted by Bloomberg.

China said this month it was considering a 25% tariff on US LNG, which had been missing from previously targeted goods, in a direct hit to American gas exporters. The move comes ahead of the winter heating season when demand and prices typically peak and shows that Chinese President Xi Jinping may be willing to suffer some pain to avoid backing down from US President Donald Trump’s trade dispute.

“If the tariff is implemented before winter, it would potentially increase the competition for non US supply to the Asian market, and

hence drive up spot prices in Asia this winter,” Maggie Kuang, an analyst with Bloomberg New Energy Finance in Singapore said in an email. “Australia, Qatar and SouthEast Asia will most likely benefit.”

Singapore Exchange Ltd’s North Asia Sling spot price was assessed at US$10.165 (RM41.68) per million British thermal units as of last Friday, the highest in a month. Prices are about 66% higher than the same time a year ago. Shares of PetroChina ended 2% lower at HK$5.81 (RM3.03) in Hong Kong, compared to a 1.5% drop in the city’s benchmark Hang Seng Index.

PetroChina in February signed a 25-year deal to buy US LNG from Cheniere Energy Inc, with a portion of that supply expected to start this year. While China is currently the third-largest buyer of US LNG, American cargoes only made up about 5.7% of its imports over the last year, according to Sanford C Bernstein & Co.

China’s proposed tariff may temporarily benefit other suppliers, US Department of Energy Deputy Secretary Dan Brouillette said in an interview in Tokyo last Wednesday, noting that he doesn’t expect any detrimental impact to the US energy industry. — Bloomberg