China Girl – U.S. LNG Returns to China, But This Time the Game Is Different

The nice thing about LNG trading is that cargoes do not get offended, pack their bags and disappear if they are not immediately needed in one port; they can be simply redirected to another. The trade tensions between the U.S. and China have created exactly this kind of rerouting story in the LNG market. As tariffs, trade restrictions and geopolitical tensions reshaped flows between the two countries, sellers were pushed to find new buyers, buyers had to find new suppliers, and traders had to find new routes. In today’s RBN blog, we look at how this shift has reshaped U.S.-China LNG trade and whether the new trading pattern is likely to stick around.

Direct LNG trade between the U.S. and China had been dormant since February 2025, but just when it looked like things would remain quiet, a cargo from the U.S. reached China again. The QatarEnergy-operated LNG carrier Al Fat’h arrived at PipeChina’s Yangpu LNG terminal on Hainan Island in mid-July with a cargo loaded at Venture Global’s Plaquemines LNG facility in early June. It may sound like a routine LNG delivery, but it was anything but ordinary. The most interesting part was not simply that U.S.-origin LNG had returned to Chinese shores; instead, it showed how U.S. LNG could physically reach China even though the commercial barriers remain in place, enabled by market flexibility and arbitrage.

The cargo was moved through QatarEnergy Trading, while the Yangpu terminal has bonded status for two of its 160,000-cubic-meter LNG tanks. That’s key, because in a bonded facility an LNG cargo can be unloaded and stored without it being designated as an import unless it is regasified and sent into the pipeline network. This allows for cargoes to be re-exported, or loaded onto bunkering vessels, without attracting the Chinese import tariffs that have largely dried up the flow of U.S.-sourced LNG to China. (The Yangpu terminal is one of eight operated by state-owned PipeChina, which could be the first to develop a true Asian LNG hub, a subject we’ll explore in a future blog.)

To understand why the Al Fat’h cargo matters, we need to look at the players behind the U.S.-China LNG trade and their long-term contracts. On the U.S. side is Venture Global, which developed and operates the Plaquemines LNG and Calcasieu Pass facilities in Louisiana. On the Chinese side, Sinopec and CNOOC Gas & Power stand out. Both signed long-term LNG supply agreements with Venture Global years before trade tensions between the U.S. and China intensified. In 2021, Sinopec signed two separate sale and purchase agreements (SPAs) to buy a combined 4 million tons per annum (MMtpa, 0.52 Bcf/d) of LNG from Plaquemines for 20 years. Sinopec’s trading arm, Unipec, also signed a separate agreement to purchase 3.5 MMtpa (0.46 Bc/d) of LNG from Calcasieu Pass. CNOOC agreed to purchase 2 MMtpa (0.26 Bcf/d) from Plaquemines for 20 years, while it also has a separate 1.5 MMtpa (0.2 Bcf/d) agreement for Calcasieu Pass. 

Because the contracts are structured on an FOB (free-on-board) basis, the buyers have the flexibility to take delivery at the U.S. terminal and place the LNG in different markets. (Destination flexibility has been the key feature of the U.S. LNG industry from the start; for more, see our Steady as She Goes series and Should I Stay or Should I Go?) That means U.S.-sourced cargoes that reached — or did not reach — China cannot be viewed solely through physical trade between the two countries. ­­While the contracts remain in place, a cargo’s final destination can change; LNG can be sold into another market instead of China, and Chinese demand can be met — or “backfilled” in trading parlance — from other, closer sources. This is where the distinction between physical flows and commercial relationships becomes important. To see why, we need to look at when and how much U.S. LNG actually reached China.

As shown in Figure 1 below, U.S. flows to China have been highly variable since the U.S. began exporting LNG in 2016. Flows strengthened rapidly in 2017 and were more consistent in 2018, with a monthly high of 17,509 MMcf recorded in April. The relationship between U.S. LNG and China had gone from a standing start to a rapid courtship in just a few years, although there is some nuance to that. Companies that signed up for U.S. cargoes immediately looked to place their large U.S. exposure with Asian buyers on Henry Hub indexation, which they did. However, hardly any cargoes under those contracts were actually sourced from the U.S.; instead, they were supplied from closer sources to China, saving costs. In that regard, the U.S. was a virtual supplier to China.