China steps back from fresh LNG contracts

December 12, 2024/in /by Rudolf Huber

LNG contracts are very long-term agreements. Often 20 years and even longer in some cases. They feature steep Take or Pay clauses. This means that once the buyer has agreed, he will take all the gas he is contractually obliged to take every year for the duration of the contract at the agreed price. Volume risk rests with him and if the buyer is not confident that the volumes will be needed in the future, he does not enter into the agreement. When China refuses to sign new long-term contracts, it tells the world that China’s growth story is over. We have known that for a while but China did not want to reduce imports for the message it sends. Looks like they don’t care anymore and let the word spread.

The move could have major ramifications for the LNG sector

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