Qatargas strikes Sinopec LNG deal at competitive price

Hendrian Sukardi


SINGAPORE (ICIS)–China’s Sinopec awarded a buy tender for 10-year, 1mtpa contractual supply within a 10-10.19% slope range to Brent crude, said a source with knowledge of the matter. The tender was awarded to state-owned producer Qatargas on 31 August. Supply will start from 2022.

The slope is lower than the recently-awarded tender between Taiwan’s CPC and US Chevron, despite Sinopec’s tender containing several strict requirements. The CPC-Chevron tender was awarded at a 10.2-10.3% slope to Brent crude, said sources.

The Sinopec deal underlines the oversupplied market that has led suppliers to agree to lower oil-linked slopes.

In an industry where historic LNG contracts were agreed at slopes between 14-15%, the Sinopec deal highlights the downward pressure on prices. Only a handful of long-term LNG deals have been reported at lower levels, according to the LNG Edge contract database.

With this new contractual supply, the discussions between US producer Cheniere and Sinopec will be indefinitely delayed, said trade sources.

The discussions over a 25-year contract for 1.8mtpa supply were shelved amid the escalating US-China trade war.

Many Chinese buyers are wary of securing US-sourced cargoes, said Chinese sources.

There are genuine concerns that US-China relations could remain difficult, regardless of the outcome of US presidential elections.


The Sinopec deal further confirms the ongoing trend that new contractual business is shifting towards shorter duration and smaller quantities.

Total VP President Denis Bonhomme said in a webinar on 24 August that many buyers are seeking more flexibility and agility.

The durations of the contracts are mostly between three and five years, with few new deals signed for 10 years and beyond.

Many new long-term deals are trending towards 1mtpa or lower, well below the kind of volumes signed in previous years.


The Sinopec-Qatar deal demonstrates that oil-linked pricing is still the preferred indexation for large and long-term supply for suppliers and buyers in Asia.

Although the linking of a northeast Asian marker for contractual supply in Asia is gaining popularity, these are limited to smaller and shorter-duration deals.

Low liquidity in spot trade in the Asian LNG market limits the depth of price discovery for the marker, said Asian traders.

Earlier this year, Chinese utility Foran Energy and UK major BP agreed a two-year supply agreement for 300,000 tonnes/year of LNG that is linked to a northeast Asian marker, said several traders.

Chinese utility Beijing Gas has yet to start discussions for contractual supply for its upcoming terminal in Tianjin municipality, a source from the firm said.

Some of Sinopec’s contractual supply with Qatar will be supplied to Chinese gas distributor Suntien Green Energy, said a Singapore-based trader.

Suntien Green Energy distributes gas supply from Sinopec to glass manufacturers in Shahe city in Hebei province, according to an analyst note .


Earlier this year, Singapore’s trader Pavilion Energy awarded a buy tender to Qatargas.

Qatargas is securing contractual sales to underpin the country’s LNG export capacity expansion, said trade sources.

This poses a major challenge to global projects looking to take a final investment decision given Qatar’s ability to offer at highly competitive prices.

The story is a little different in India, however, where Qatargas is unlikely to agree to a lower oil-linked slope in its 7.5mtpa supply deal with buying consortium Petronet, said an Indian trade source.

Qatar is largely reliant on LNG exports, which account for around 43% of its export market.


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