China Tariffs Add Costs But Trade to Continue

US LNG terminal developers and operators at a Gastech panel session in Barcelona September 18 were generally relaxed about the impact of Chinese tariffs on US LNG exports, but foresaw higher costs arising from the inefficiencies that circumvention would impose.

With US LNG exports hit with an initial 10% tariff rising to 20%, the onus would be on the buyer to swap out a cargo intended for China for another cargo not from the US, for delivery to China. As one source agreed, LNG is not colour-coded; it cannot be dyed for identification as originating from the US, although it could impact shipping and add extra costs to trading.  

That was the implication of a comment by Cheniere's strategy head Andrew Walker, who said that the company would see no economic impact on its long-term contracts with CNPC, which are destination-flexible. "This is a flexible, liquid market and it allows the inefficiencies to be worked around. The market will clear: it is already looking tight this winter, and prices are close to crude parity," he said.

And Next Decade's investor relations manager Patrick Hughes said that with the US poised to become the world's biggest LNG exporter, and China the biggest importer, large amounts of US LNG would end up in China. "I don't think the tensions today will have any long-term impact on our projects, or engaging Chinese buyers," he said. And Stuart Taylor, who will market the output from the planned Jordan Cove export project in Oregon on the US west coast, added that US LNG needed some definition as his project will be liquefying some gas from Canada too.