Chinese Energy Producers Secure Long-Term Natural Gas Supply from Novatek

Russia’s second-largest natural gas producer Novatek [NVTK:LI] has signed a long-term procurement agreement with two Chinese energy firms, Zhejiang Energy and ENN Natural Gas [600803:CH], as reported by Caixin on January 12. Under the contracts, the Russian company will supply up to 1m tons of liquefied natural gas (LNG) per year for 15 years in total to Zhejiang Energy, and 600,000 tons per year for 11 years to ENN Natural Gas. All the LNG supply will be sourced from Novatek’s Arctic LNG 2 project, which provides 5.76m tons of LNG to Chinese buyers per year, equivalent to 29% of the project’s planned production capacity.

In 2021, China surpassed Japan for the first time to become the world’s largest LNG importer, according to a report from IHS Markit [INFO:US]. The country’s LNG imports expanded 17.8% YoY to 81.4m tons last year due to the rebounded power demand from industrial sectors and China’s carbon reduction and energy conservation initiative. China sees natural gas as a cleaner power to gradually replace its pillar energy coal, which accounted for 63.2% of the country’s total electricity output in 2020. China’s major oil and gas producer, Sinopec [SNP:US], suggested that the annual national gas consumption would grow 87.3% from the current level to 620bn cubic meters in 2040, before overtaking oil as the major fuel source by 2050.

Sources:

https://www.caixin.com/2022-01-12/101829127.html

https://www.highnorthnews.com/en/novatek-signs-contract-long-term-lng-supply-two-chinese-companies

https://www.caixin.com/2022-01-06/101826677.html

https://www.dw.com/en/russian-gas-boost-fuels-moscows-china-pivot/a-60393843