China Eyes U.S. Energy After Inking $20 Billion in Deals

China is setting its sights on U.S. energy as a growing reliance on imports forces it to look beyond traditional suppliers, according to the head of the country’s biggest oil and gas company.

China National Petroleum Corp. will import more crude oil and natural gas from the U.S. and will consider participating in America’s growing liquefied natural gas export industry, Chairman Wang Yilin said in an interview Sunday with Bloomberg TV on the sidelines of the Belt and Road Forum in Beijing. The energy giant will sign $20 billion in deals during the two-day event, a meeting of countries involved in China’s initiative to connect Europe, Asia and Africa through infrastructure and investment.

“The U.S. has very rich oil and gas resources, and as China pursues a diversification of its crude supply the U.S. will of course be one of the sources.” Wang said. “We will consider exploring cooperation in areas such as jointly developing liquefied natural gas facilities and gas transport.”

China’s growing use of U.S. energy is taking CNPC beyond the Belt and Road plan, which is President Xi Jinping’s cornerstone trade initiative. Wang’s comments follow a separate deal between China and the U.S. announced Thursday by President Donald Trump’s administration that welcomed the country engaging in long-term contracts with American LNG suppliers.

CNPC currently has more than 50 joint projects under way in 19 countries taking part in Belt and Road, according to Wang. In Central Asia and Russia, they’re mainly focused on natural gas, while in African and Middle Eastern nations the majority of projects concern oil.

Read more: Xi Opens China’s Globalization Forum With $78 Billion Pledge

Falling Production

The world’s biggest energy user is becoming more reliant on overseas crude supplies as production at home plummets after its state-run firms — including CNPC’s listed unit PetroChina Co. — cut spending to cope with the price crash. China has overtaken the U.S. as the world’s biggest oil importer, and emerged in February as the largest buyer of crude from the U.S., which has boosted exports thanks to the country’s shale oil boom.

Though China’s oil giants are raising combined spending for the first time in four years, that may not be enough to halt the drop in domestic crude output, especially as focus shifts toward natural gas, according to the International Energy Agency. Production in the first four months dropped 6.1 percent from the same period a year ago, extending the record pace of declines in 2016. Imports are up more than 12 percent during that period.

“We need to speed up our cooperation with resource countries to develop assets to meet China’s growing need for oil and gas,” Wang said. “By doing this, we can balance the higher reliance on imports with better use of foreign assets.”

PetroChina rose 0.2 percent to HK$5.32 as of the noon trading break in Hong Kong, compared with a 0.6 percent gain in the city’s benchmark Hang Seng Index.

Aramco, Gazprom

The $20 billion in deals to be signed during the Belt and Road Forum include Saudi Arabian Oil Co. taking a stake in the company’s Yunnan refinery, a $4 billion agreement for a natural gas processing plant in Azerbaijan with the State Oil Co. of Azerbaijan, gas storage and gas-fired power projects with Russia’s Gazprom PJSC and a geothermal project in Kenya, according to CNPC.

The agreement with the U.S. announced last week could pave the way for a second wave of investment in U.S. LNG terminals, according to Wood Mackenzie Ltd. American supplies accounted for almost 7 percent of China’s LNG imports in March, customs dada show. The nine cargoes sent over the last year to China from Cheniere Energy Inc., the first U.S. exporter from the country’s lower 48 states, were sold on a so-called spot basis, rather than under long-term contracts, the consulting company said.

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