(Yicai) Oct. 10 -- China Petroleum and Chemical Corporation, better known as Sinopec, has informed its Australian partner that it would like to reduce the price of the liquefied natural gas previously agreed in their long-term supply deal.

“Origin Energy confirms that Australia Pacific LNG has received a price review notice from Sinopec in respect of its long-term LNG supply contract with Australia Pacific LNG,” Sydney-based Origin Energy announced on Oct. 4.

Australia Pacific LNG is a joint venture between US crude oil and natural gas explorer and producer ConocoPhillips, Australian electricity and natural gas retailer Origin Energy, and Sinopec. They own 47.5 percent, 27.5 percent, and 25 percent of Australia Pacific LNG, respectively.

In April 2011, Sinopec signed a supply deal with Australia Pacific LNG to purchase 4.3 million tons a year of LNG for 20 years from 2015. Later that year, the Chinese firm increased the annual procurement amount to 7.6 million tons.

The terms of the agreement are confidential, but Australia Financial Review reported in April 2011 that the contract value was about USD90 billion.

“The deal will help Sinopec diversify its natural gas supplies to fulfill China’s rapidly growing demand,” Zhang Yaocang, then deputy general manager of the Beijing-based company, said back then.

The outbreak of the Russia-Ukraine conflict in 2022 was a “watershed moment” for the commoditization of LNG, Yang Xiaoguang, executive deputy GM of Enn International Trade (Singapore), told Yicai. That year, the global natural gas trade volume fell 1 percent to 1.21 trillion cubic meters from the previous year, while LNG trade, which accounted for nearly half of the total, surged 5.1 percent.

Energy security became a priority for many countries after the Russia-Ukraine conflict broke out. According to the International Energy Agency, Asia signed 37 percent of the world’s total LNG contracts in 2022 for a total of 22 billion cubic meters per year, with China accounting for 21 percent.

In the past three years, China signed long-term LNG supply deals effective from between 2026 and 2030 for 63 million tons, Li Yao, founder and chief executive officer of Sia Energy, told Yicai.

“From 2026 to 2030, there will be a sufficient supply of natural gas in China, but the price will likely slump,” Li said. Therefore, the liquidity of LNG trade is expected to improve significantly, causing spot prices to be halved, he added.

Li believes that to better cope with cyclical challenges, enterprises can either opt for a competitive and flexible resource pool and import cheaper resources for cost optimization or strengthen the ability to quickly absorb the downstream stagflation through an integrated industrial chain layout.

Editor: Futura Costaglione