Cheniere Energy held Thursday to its target to advance its midscale liquefaction expansion at its Texas export terminal next year even if US-China trade tensions remain hot, hopeful that buyers from other countries will fill any gaps. The biggest LNG exporter in the US has long viewed Chinese demand as the main driver of its future growth potential, especially in terms of commercializing its 9.5 million mt/year Corpus Christi Stage 3 project.
That calculation is being tested by tariffs imposed by Beijing on imports of US LNG in retaliation for tariffs imposed by Washington on imports of Chinese goods. The impact on signing new long-term deals could worsen Friday for Cheniere and other developers trying to finance LNG terminals if the US raises its tariffs as promised. Already for months, cargoes from the US bound for China have mostly been diverted to other countries to avoid the existing duties, and Beijing has vowed to retaliate for any further US action.
“We have a robust level of engagement and we are comfortable Stage 3 is a 2020 event with our without China,” Chief Commercial Officer Anatol Feygin said during a conference call with analysts to discuss first-quarter financial results.
Without China would require more offtake to utilities in South Korea and Japan and end-users and traders in Europe, at a time when some LNG market participants are raising concerns about over-building and fierce competition for contracts.
Chinese “demand is going to continue to grow,” CEO Jack Fusco said on the call. “It’s going to get filled by somebody. Preferably, it’s from the US. If not, it will be from somewhere else.”
Fusco said he’s betting on the strength of Cheniere’s marketing team to find buyers in other traditional and emerging markets.
LNG netbacks to the US Henry Hub have begun to soften this month, with the calculated netback from the Platts JKM, the benchmark price for spot-traded LNG in Northeast Asia, falling below $1.30/MMBtu on Thursday, a roughly 70 cents/MMBtu drop from recent highs in mid-April. The JKM is still pricing at a roughly 65 cents/MMBtu premium to the UK’s National Balancing Point, on a netback basis, which suggests that some flexible US LNG volumes should shift away from that market and head to Asia. Europe will need to maintain a discount to the JKM this coming summer in order to shed some of the record high LNG deliveries, which have already brought continental gas storage well above the five-year average.