Zhejiang Energy, BP ink 10-yr LNG deal

In a move highlighting the sustained demand for natural gas in China and the ongoing efforts to secure long-term energy supplies, British energy company BP signed a 10-year liquefied natural gas (LNG) sale and purchase agreement on Wednesday with Zhejiang Provincial Energy Group Co Ltd.

Under the agreement, BP will provide Zhejiang Energy with up to 1 million metric tons per annum of LNG for over 10 years on a delivered ex-ship (DES) basis from BP's diverse portfolio of LNG assets.

This long-term commitment underscores the importance of LNG in China's energy mix as it continues to balance economic growth with environmental considerations.

China has been accelerating its natural gas purchases as well as facilitating construction in recent years, eyeing to further ensure sufficient energy supplies amid its green transition, said industry experts.

China's natural gas market, which previously saw rapid growth and abundant supply, is expected to shift to medium-to-high speed growth with overall supply and demand remaining balanced over the next five years, they said.

"State-owned enterprises have led China's expansion of its capacity to handle LNG, while private companies are playing an increasingly active role in building LNG terminals," said Li Ziyue, an analyst with BloombergNEF.

Long-term contracts can help secure gas supplies and mitigate price volatility risks, Li said.

Rystad Energy earlier predicted that China's LNG imports would reach over 83 million tons in 2025, exceeding the previous record high in 2021, driven by the potential for industrial sector recovery, especially with government stimulus measures aimed at boosting domestic demand and bolstering the property market.

Ma Yongsheng, chairman of China Petroleum and Chemical Corp, said the Asia-Pacific region has become the core engine of global gas demand growth.

China has been looking to sign long-term LNG deals to avoid future shortages and reduce dependence on spot deliveries in recent years.

Wan Jinsong, deputy head of the National Energy Administration, said China has made substantial progress in gas infrastructure, including the near completion of a national pipeline network and advancements in deepwater and unconventional resource extraction.