China’s Sinochem Group is in advanced discussions with PipeChina to use its LNG terminals. The move came after Sinochem, which has traditionally traded oil and chemicals, signed its first-ever deal to buy US LNG from Cheniere Energy. Sinochem is seeking an agreement that will allow it to receive LNG at PipeChina’s terminals, including the new 6 million tons/year facility in Zhangzhou, Fujian province, slated for start-up in 2022.
The contract will help Sinochem execute its growth strategy. On the other hand, a deal with Sinochem means PipeChina obtains a stable LNG customer, which can offset weak demand from smaller importers. Market participants said PipeChina needs big players like Sinochem after it opened up terminals to smaller importers outside state-owned majors like PetroChina, which are more exposed to a volatile spot market.
Sinochem expects new growth from LNG to complement its oil and chemical business. Earlier this year, the company set up a gas trading team based in Beijing, following a similar step by state-owned players and privately controlled distributors such as ENN Natural Gas Co. Sinochem is expected to start trading gas while also anchoring on some of its own outlets, including its refinery in Quanzhou that will use gas for hydrogen production and petrochemical processing.
