Hot air? U.S. gas exporters rush to sell LNG to China

By Josephine Mason and Chen Aizhu

BEIJING (Reuters) - U.S. gas exporters and traders are aiming to grab a bigger chunk of the lucrative, growing business of exporting gas to China, the world's third-largest buyer, when they accompany Commerce Secretary Wilbur Ross to China next month.

But the talk may all be hot air if the U.S. suppliers can't compete with bargain prices agreed on long-term deals with rivals Australia, Qatar and Malaysia.

According to a list seen by Reuters, 10 of the 29 companies travelling with Ross and U.S President Donald Trump are involved in energy and gas.

Among them are Cheniere Energy Inc (LNG.A), which operates the only U.S. LNG export terminal and Freepoint Commodities, founded and run by David Messer, who led power utility Sempra's vaunted commodities division.

Their presence underscores the U.S. ambition to sell more of its excess gas abroad as the U.S. shale revolution threatens to upset the global LNG market.

China's appetite has soared as it embarks on an audacious bid to heat millions of homes across the north by gas for the first time this winter and switch tens of thousands of industrial boilers to the cleaner fuel as part of its push to clear the skies.

Without sufficient domestic output to meet growing demand, imports have surged this year, offering huge potential for major exporting nations such as the United States.

"We're on the mission to talk to Chinese companies to get something signed up," said Frederick Jones, founder and chief executive of Delfin Midstream LLC, which is building floating LNG vessels that would sit 50 miles off the coast of Louisiana.

He's heading to Beijing on the trip scheduled to begin on Nov. 8 with his chief financial officer Matthew Weil. Delfin has no customers yet for its new terminal, but hopes to "showcase" the company to state-owned and large private companies.

Delfin has been in talks with Chinese buyers for potential offtake deals as well as funds for financing, according to a person with knowledge of the exchanges.

A Chinese oil trading executive involved in discussions ahead of the trip expected the delegation to yield several short-term supply deals.

EXPLODING DEMAND

In May, the United States and China agreed to boost trade under the "100-day" trade talks aimed at reducing a U.S. trade deficit with China that reached $347 billion last year. Among the agreements is one allowing Chinese buyers to purchase long-term supplies from the United States directly.

Current long-term contracts with Qatar and Australia signed between 2009 and 2013 will expire around 2030/40, but China will need to top up imports to meet growing demand.

Uncertain when the global LNG market will bottom out, Chinese buyers are cautiously avoiding lining up new long-term contracts, but rather are looking at signing five-year or even shorter-term deals based on spot prices, sources said.

U.S. imports of LNG have exploded this year.

In the first nine months of the year, shipments hit almost 600,000 tonnes, ranking the United States as the sixth largest LNG importer, leap-frogging Nigeria and Peru.

The average price China paid for U.S. LNG was $7.62 per million of British thermal units (mmBtu) over the past 12 months on a delivered basis, compared to $6.54 for Australia, according to Reuters calculations based on monthly customs data.

In 2016, China imported just under 200,000 tonnes of LNG, up from 62,601 tonnes in 2015.

China expects that gas demand will rise to between 320 and 360 billion cubic metres per year by 2020. The increase is the equivalent of the annual consumption of Japan, Asia's second-largest gas consumer after China.

(Reporting by Josephine Mason and Chen Aizhu in BEIJING and Gary McWilliams in HOUSTON; Editing by Bill Tarrant)