Cheniere Energy Inc. said Friday it has reached a deal with China’s Sinochem Group Co. Ltd. to supply 0.9 million metric tons/year (mmty) of liquefied natural gas (LNG) beginning in July 2022. 

The state-owned chemical conglomerate would buy LNG under the sales and purchase agreement (SPA) for a term of 17.5 years. Its purchases would eventually increase to 1.8 mmty, Cheniere said, without providing a timeline. Sinochem would purchase the LNG on a free-on-board basis at prices indexed to Henry Hub, plus a fixed liquefaction fee.

“The SPA further reinforces our commercial momentum, and once again confirms the strength of the global LNG market and the global call for investment in additional LNG capacity, including our Corpus Christi Stage 3 project,” said Cheniere CEO Jack Fusco.

Cheniere expects to sanction the 10 mmty expansion at its Corpus Christi export terminal in South Texas next year. Management said during a third quarter earnings call Thursday that the company needs to contract another 3 mmty of supplies to move ahead with the project. 

Friday’s announcement once again makes clear that global gas buyers are eager to lock in supplies under long-term deals after a stretch of inactivity. The market had been oversupplied in recent years, but a confluence of factors including supply outages, inclement weather, logistical issues and other commodity shortages have sent natural gas prices soaring in 2021. The long-term contracts are more attractive amid volatility on the spot market. 

Project final investment decisions have also declined in recent years amid lower prices and the pandemic, leaving a projected gap in supply over the next two decades. Cheniere estimates that 70 mmty of LNG will be needed by 2030 and up to 210 mmty by 2040.

The Sinochem deal was Cheniere’s third SPA in the last two months. Along with Venture Global LNG Inc., which is close to bringing on the Calcasieu Pass LNG terminal in Louisiana, the companies have inked deals to sell 11.5 mmty of LNG since September. 

Chinese buyers have factored heavily into those agreements, with China Petroleum & Chemical Corp. and ENN Natural Gas Co. Ltd. signing up for offtake. The country’s natural gas demand has increased sharply as its economy rebounds and the government works toward climate goals. Power shortages in recent weeks also have made longer-term deals a top priority.