Two gas distributors in China, ENN and Zhejiang Energy, have finalised plans made last year to secure additional gas imports from Russia to the quickly growing market in the country.
China’s largest independent gas distributor ENN has signed a long-term take-or-pay contract with Russia's largest gas producer Novatek for the supply of liquefied natural gas to the Zhoushan terminal in China’s Zhejiang province.
The contract calls for Novatek to deliver 600,000 tonnes per annum of LNG for 11 years from its upcoming Arctic LNG 2 project on the Gydan Peninsula in West Siberia, due to start first shipments in 2023.
ENN did not clarify the timeframe when the supplies will begin.
ENN operates 230 town gas distribution projects in China, with distribution capacity exceeding 10 billion cubic metres per annum, approximately equivalent to 7.2 million tonnes of LNG.
Company president Zheng Hongtao said the contract will further expand ENN’s LNG import portfolio, while helping meet domestic demand and China’s low-carbon energy transition.
This is the second sales and purchase agreement ENN has signed in three months following a major restructuring of its business assets in 2020.
In October last year, the Hebei-headquartered company reached an agreement to purchase 900,000 tpa of LNG from US player Cheniere Marketing for a period of 13 years, with deliveries beginning in July 2022.
The purchase price for LNG under this SPA is indexed to the Henry Hub price, plus a fixed liquefaction fee.
ENN plans to double the capacity of its Zhoushan gas receiving terminal to 10 million tpa by the end of 2024, making the facility one of China's largest.
According to Novatek, a second agreement has been signed with Zhejiang Energy.
It calls for the annual supply of up to 1 million tonnes of LNG for a 15-year term to receiving terminals in Zhejiang province.
Novatek holds a 60% shareholding in Arctic LNG 2 that has planned annual production capacity of almost 20 million tonnes of LNG, which gives the independent company the right to about 12 million tpa of future output.
In 2021, Novatek committed to deliver more than 3 million tpa of LNG for a period of 15 years to China's Shenergy, and a further 500,000 tpa to international commodity trader Glencore.
Cargoes for Glencore will be offloaded at trader-indicated regasification terminals in East Asia, according to Novatek.