Oil and Gas

Exxon Mobil agrees to a 20-year LNG deal with China's Zhejiang Energy

Key Points
  • Exxon Mobil said it has signed a 20-year agreement to supply liquefied natural gas (LNG) to China's Zhejiang Energy.
  • The U.S. oil and gas giant is stepping up marketing of the fuel in China, the world's second-largest buyer.
  • The agreement, which follows a framework deal announced last October, did not give details on price or timing, or say where the supplies will be sourced.
A truck enters the ExxonMobil refinery in Notre-Dame-de-Gravenchon, northwestern France.
Charly Triballeau | AFP | Getty Images

Exxon Mobil said it has signed a 20-year agreement to supply liquefied natural gas (LNG) to China's Zhejiang Energy, as the U.S. oil and gas giant steps up marketing of the fuel in China, the world's second-largest buyer.

Under the sales and purchase agreement, Exxon Mobil will supply 1 million metric tons a year of the super-chilled fuel to the provincial government-backed Zhejiang Energy, Exxon said in a statement late on Monday.

The agreement, which follows a framework deal announced last October, did not give details on price or timing, or say where the supplies will be sourced.

Exxon Mobil said last year it would deliver the LNG starting in the early 2020s, while LNG supplies to China would come from its global portfolio.

The U.S. firm has been expanding its portfolio of LNG, including from upcoming projects in Mozambique, Papua New Guinea, Qatar and Golden Pass in the United States.

Zhejiang Energy is building a 9 billion yuan ($1.34 billion) receiving terminal for the fuel in Wenzhou, in the eastern province of Zhejiang, with annual handling capacity of 3 million tonnes.

Chinese state oil and gas major Sinopec will be a partner in the terminal.

Chen Zhu, managing director at Beijing-based consultancy SIA Energy, said the Exxon-Zhejiang deal was separate from U.S.- China trade negotiations under which Chinese firms are expected to eventually boost purchases of U.S. gas.

"The gas supplies to the Zhejiang firm will come from Exxon's portfolio production outside the U.S.," Chen said, adding that the Wenzhou terminal is likely to be operational in 2022 or 2023.

Exxon already has two long-term LNG supply agreements in China, one each with Sinopec and CNPC, China's largest state oil group, she said.

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Key Points
  • Oil prices jumped more than 2% in the previous session, hitting their highest level this year amid intensifying concern about global supplies after the U.S. announced a further clampdown on Iran's oil exports.
  • International benchmark Brent crude traded at $74.40 Tuesday morning, up around 0.5%, while U.S. West Texas Intermediate (WTI) stood at $65.93, almost 0.6% higher.