Exxon Mobil bets big on China LNG, skirts trade war

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Energy giant set to tap Beijing’s soaring natural gas demand

In the middle of a Sino-U.S. trade war, the world’s largest publicly-traded oil and gas company is turning toward Beijing for business at a time when most of corporate America is looking elsewhere to avoid the threat of tariffs.

Exxon Mobil Corp. is placing big bets on China’s soaring liquefied natural gas (LNG) demand, coupling multi-billion dollar production projects around the world with its first mainland storage and distribution outlet.

Its gas strategy is moving on two tracks: expanding output of the super-cooled gas in places such as Papua New Guinea and Mozambique, and creating demand for those supplies in China by opening Exxon’s first import and storage hub, according to an Exxon manager and people briefed on the company’s plans.

‘Building client roster’

That combination “will guarantee us a steady outlet for lots of our LNG for decades,” said the Exxon manager who was not authorised to discuss the project and spoke on condition of anonymity. One of the company’s top policy goals this year, the manager said, is building its Chinese client roster.

“China’s natural gas demand is rising really fast, with imports soaring well over 10% annually at the moment because of the government gasification programme and due to fast- rising industrial demand, including in petrochemicals,” the Exxon manager said.

An Exxon spokesperson declined to provide an executive to discuss the company’s LNG investments in China. Exxon said last month it would participate in the construction of an LNG import terminal in Huizhou, Guangdong region and provide supplies to it. This makes it only the second foreign major with such a stake in an LNG terminal.

Years in the making, the strategy delivers an added benefit: helping Exxon sidestep a global trade war. Exxon’s massive LNG projects in Papua New Guinea and Mozambique will not incur the 10% China put on U.S. gas as part of the trade war between the Trump administration and Beijing.

Jason Feer, head of business intelligence at LNG tanker brokers Poten & Partners, which tracks LNG sales, said the deal provides “a sign that China is willing to let foreign interests invest in things that in the past were seen as strategic.”

Exxon is among the top ranked U.S. companies that are pushing ahead in China despite the trade dispute, but it is not alone. U.S. and European car makers are opening or expanding China plants to avoid hefty tariffs and transport costs. Tesla Inc. this month acquired a Shanghai site for a car and battery-manufacturing complex.

Exxon’s Asian and African LNG will offer a cost advantage over U.S. rivals’ exports that face tariffs and greater transport, while China’s support for the project offers a rebuttal to Trump administration complaints about the country’s closed markets.

The decision to expand its LNG production and open an import terminal in the world’s fastest growing LNG market is a step by Exxon CEO Darren Woods to pull the firm out of an earnings rut that has left its shares flat over the past seven years.

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