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Gulf Coast Exporters Talk Up LNG, Ethane Sales to China

U.S.-based energy companies this week announced billions of potential investments from Chinese firms that would not only ensure financing to develop domestic natural gas but also the wherewithal to export more gas and ethane products to the fastest growing market in the world.

Multiple gas-related deals, announced during President Trump’s first trade mission to the Asia-Pacific, were led by Alaska and West Virginia, each securing potentially billions in future investments.

Chinese operators tentatively agreed to provide financing for languishing Alaska liquefied natural gas (LNG) exports, while West Virginia officials touted a potential investment of close to $84 million to develop shale gas and petrochemical projects.

But they were far from the only big gas-related news between U.S. and Chinese companies. Most of the transactions are in the form of joint development agreements (JDA), letters of intent or memorandums of understanding (MOU), nonbinding agreements that are preliminary and may require years of negotiations, but Houston-based American Ethane Co. LLC (AEC), announced it has a binding contract in hand to export ethane to Chinese markets.

Gulf Coast LNG operators Cheniere Energy Inc. and Delfin LNG each secured MOUs to export gas to Chinese markets.

In its MOU with gas distributor China Gas Holdings Ltd., Delfin gained more clout for its proposed first-of-its-kind floating LNG export project offshore Cameron Parish, LA. A final investment decision is expected next year and startup as soon as 2021.

Under the MOU, China Gas agreed to take up to 3 million metric tons/year (mmty) over 15 years, said Delfin CEO Frederick Jones, who accompanied the president to Asia.

Delfin also signed an MOU with Chongqing Oil and Gas Exchange to help develop a trading platform designed to connect the Chinese market with international markets, similar to the Henry Hub, according to Bloomberg. Chongqing is in Western China, near the largest gas province of Sichuan.

Cheniere, which operates Sabine Pass LNG, the only operating export facility in the Lower 48, is said to have an MOU to export gas for China National Petroleum Corp. worth as much as $11 billion. Cheniere also is building an export terminal in Corpus Christi, TX.

Cheniere would not confirm any details about the MOU, however. A spokesperson on Friday said the Houston operator would not “release the text of the MOU nor any details of its contents.”

Meanwhile, AEC, a privately held operator developing an ethane export terminal on the Texas Gulf Coast, announced one of the largest binding contracts of the trade mission.

AEC, whose proposed ethane project has not broken ground, made its official announcement this week after securing a contract in June worth an estimated $26 billion with Nanshan Group. According to the contract, AEC agreed to supply up to 2.6 mmty of ethane over 20 years to an ethylene cracker Nanshan is building in China. The Texas terminal as proposed would have output of up to 10 mmty.

AEC in May 2015 completed a front-end engineering design study. Construction now is to be “coordinated  with downstream infrastructure in China and is expected to be started in early 2018 and completed by 2020,” AEC said.

Terminal construction would be coordinated in four phases, and AEC is working with “major shipowners” to move volumes by very large ethane carrier vessels.

“This deal will create thousands of jobs in our countries, and American Ethane will also invest in infrastructure in China,” said AEC CEO John Houghtaling. “As one of the larger deals of this summit, the agreement meets the U.S. goal of reducing the trade deficit, China’s goal of creating for the first time an ethane-to-ethylene production...and the mutual goal of providing a long term economic link between our two countries.”

AEC, he said, “has more than 10 potential petrochemical customers in China each willing to take 1 mmty-plus of ethane per year. Two of them, 2.6 mmty each, are in the final negotiation phase and plan to reach definitive sales and purchase agreement by end of 2017, which will strengthen U.S.-China trade ties even further.”

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