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China casts shadow over new U.S. LNG terminals with tariff

By Sabina Zawadzki

By Sabina Zawadzki

LONDON (Reuters) - China set a tariff on U.S. liquefied natural gas (LNG), casting a shadow over U.S. plans for new export terminals that were expected to turn the United States into the world's second largest LNG seller.

Beijing announced on Tuesday it would tax U.S. products worth $60 billion in retaliation for tariffs imposed by U.S. President Donald Trump in an escalating trade war.

China will impose a 10 percent tariff on U.S. LNG from Sept. 24. But the rate was smaller than the 25 percent China had touted, which offered some relief and helped shares in listed U.S. LNG companies climb in early trade.

The tariffs undermine Trump's drive to make the United States a global energy leader.

LNG, which involves liquefying gas to so that it can be transported by ship rather than pipeline, has become one of the fastest growing commodity trades as nations seek cleaner fuels.

China was the world's second-largest LNG importer last year, behind Japan and ahead of South Korea. New U.S. terminals were expected to account for 60 percent of all new LNG production coming to market by 2023, according to industry data.

Analysts say the tariffs will particularly hit plans by U.S. companies, such as Cheniere Energy, Sempra and Kinder Morgan, to build new terminals or expand existing ones by adding processing units, known as "trains".

Stacey Morris, director of energy research at Alerian Indexes, said tariffs would "likely be a negative for LNG projects in the U.S. looking to secure future sales contracts with Chinese customers".

"Some commercial agreements may be on hold until there is more visibility," she said, adding that this would likely delay investment decisions on LNG projects.

Cheniere, Kinder Morgan and Dominion Energy declined to comment.

But the smaller Chinese tariff than expected helped lift Cheniere Energy, whose shares were up 2.3 percent, and Golar LNG, whose stock rose 1.8 percent.

China imported 1.6 million tonnes, or 11 percent, of the 14.9 million tonnes of LNG exported from the United States so far this year, according to Thomson Reuters data. That accounted for 5 percent of total Chinese LNG imports.

The United States has two terminals to export LNG with total capacity of 23.3 million tonnes a year (mtpa), namely Cheniere's Sabine Pass facility in Louisiana and Dominion Energy's Cove Point terminal in Maryland.

Another 37 mtpa of capacity is expected to be added between 2019 and 2021. There are dozens of plans for new terminals or new trains to be added to existing plants.


(Additional reporting by Henning Gloystein in Barcelona and Scott DiSavino in New York; Editing by Dale Hudson and Edmund Blair)