A new agreement between the United States and China indicates that trade relations for liquified natural gas (LNG) are on the mend, which is great news for both countries.
Reporting from Oil Price earlier this week explains that U.S. LNG producer and exporter Cheniere Energy has recently signed an agreement with China’s Foran Energy Group to once again begin trading LNG. The deal will require Cheniere to sell 26 LNG cargoes to Foran Energy over the next five years. The trade agreement is the first commercial LNG supply deal between the United States and China since 2018, when the countries entered a trade war that included tariffs on American energy products.
Fortunately, the deal also reflects a growing trend in LNG demand around the world. Many countries—namely China and India—already have high demand for U.S. LNG. In fact, the Energy Information Administration’s LNG export outlook for 2020 is 29 percent higher than the 2019 average and was recently revised to include an extra 6.4 billion cubic feet per day amid anticipation of higher demand.
China alone will likely grow demand by 10 percent this year and is set to become the world’s top LNG buyer by 2022.
Not to be overlooked, India is another up and comer in LNG demand growth as it works to reduce CO2 emissions amid rapid industrialization. The country is shifting away from its long-time reliance on coal as its primary power source so dramatically that India’s natural gas demand could eventually match China’s. India’s most challenging hurdle to overcome is updating its technology and infrastructure to support natural gas, but the country’s massive population and underdeveloped economy means that there is tremendous future potential for U.S. LNG.
Post near-term growth is also slated to take place in China and India. As global demand for Chinese and Indian-made goods continues to grow, so too will their need for new factories and plants to build them. U.S. LNG can be there to supply these nations with the necessary fuel to power their clean-burning industrial revolutions, as is evident by the pro-gas policies and incentives to encourage manufacturers to adopt natural gas that both countries have adopted.
These new developments in China and India are a very clear indication that U.S. LNG exports are on the path to power an ever-developing world, and help reduce global emissions in the process.
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