ENN inks long-term deal with UAE seller for LNG supply | investinchina.chinadaily.com.cn
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ENN inks long-term deal with UAE seller for LNG supply

By ZHENG XIN China Daily Updated: 2023-12-22
An LNG vessel docks at Zhoushan Port, Zhejiang province. [Photo by Yao Feng/for China Daily]

Abu Dhabi National Oil Co's long-term LNG (liquefied natural gas) deal with a subsidiary of China's ENN Natural Gas Co Ltd will ensure a stable clean energy source for the nation, as LNG has become increasingly important in the country's energy mix, analysts said.

United Arab Emirates-based ADNOC has signed a 15-year agreement with ENN LNG, a Singapore-based subsidiary of ENN Natural Gas, for the delivery of at least 1 million metric tons of LNG a year, primarily sourced from its low-carbon Ruwais LNG project, currently under development in Al Ruwais Industrial City, Abu Dhabi, the company said on Wednesday.

Deliveries are expected in 2028 when commercial operations at Ruwais begin, ADNOC said in a statement.

The agreement with ENN LNG is subject to a final investment decision, including regulatory approvals and reaching a definitive sale and purchase agreement, it said.

Cao Lujia, an analyst at BloombergNEF, said the deal will further diversify ENN's LNG supply sources.

Chinese buyers, including the three major oil and gas companies and second-tier city gas companies, have been actively signing LNG contracts in recent years, Cao said.

"The Chinese importers have signed roughly 30 million tons of LNG sales and purchase agreements since the beginning of 2022, which is close to the total contract volume signed from the rest of the demand markets."

As more LNG contracts come into effect in the coming years and potentially outgrow domestic gas demand, China may possibly turn into a swing supplier, she added.

LNG is becoming more significant than ever in China's energy mix as the country seeks to reduce its reliance on coal and transition to cleaner fuels.

The latest agreement aligns with China's energy security goals and supports its efforts in meeting environmental targets, said Luo Zuoxian, head of intelligence and research at the Sinopec Economics and Development Research Institute.

"The deal also reflects a broader trend of major global energy producers looking to strengthen ties with Chinese consumers, capitalizing on the region's economic growth and rising energy demand," Luo said.

"For ADNOC, China represents a key market, and this agreement further solidifies the UAE's position as a reliable supplier of energy resources to Asia. China's efforts will, in turn, help support global export projects as well."

Long-term contracts play a key role in helping China secure LNG supplies in an increasingly volatile gas market because of their relatively steady prices compared to the spot market, he added.

China has been stepping up purchases of natural gas as well as facilitating construction in recent years, as part of efforts to ensure sufficient energy supply amid its green transition.

The nation is on track to become the top importer of LNG worldwide in 2023, as Chinese companies agree to buy more on a long-term basis than any other single nation for a third straight year, Bloomberg said.

The country is looking to sign more deals to avoid possible shortages and reduce dependence on spot deliveries, it said.

According to the National Development and Reform Commission, China's natural gas consumption rose steadily in the first 10 months of this year amid efforts to achieve green development, with apparent consumption of natural gas exceeding 321.7 billion cubic meters, up 7.1 percent year-on-year.

ADNOC said it plans to more than double its LNG production capacity to meet rising global demand through its new project.

The Ruwais plant will have electric-powered processing facilities and run on renewable and nuclear grid power, making it one of the lowest carbon-intensity LNG facilities globally.