Exxon has signed a 20-year deal with China that sees the American company supplying liquefied natural gas (LNG) to the country as Beijing aims to promote clean energy and drop coal.
According to CNN, the United States' biggest energy company bagged the agreement at a notable time as tensions between China and the U.S. started to ease over the past few weeks. It is unclear if the natural gas supply will come from U.S. plants or overseas factories.
Under the deal, Zheziang Provincial Energy Group is expected to purchase 1 million metric tons of LNG from Exxon on an annual basis. In the LNG industry, the purchase conditions are small. However, Exxon said the deal is an "important milestone."
"The new Exxon contract is more significant of the buyer than the volume," global head of gas and power analytics at S&P Global Platts, Ira Joseph, noted. Joseph's statements echoed Exxon's comments that it is committed to "long-term" deals with China.
China is considered as the world's fastest-growing LNG importer and the U.S. is slowly rising in the ranks of world leaders in LNG sales. Analysts pointed out that if the trade dispute didn't intervene, the two countries would have been great partners in natural gas.
Beijing has been working to help China transition from coal power to cleaner energy. The Chinese government recently announced that it will impose bans on new coal plants in eight regions.
The Chinese National Energy Administration said on Friday that Gansu, Xinjiang, Shanxi, Ningxia, Shandong, Heilongjiang, and the eastern part of Inner Mongolia, will be blocked from approving new coal projects.
It is worth noting that the said regions actually have adequate solar and wind resources to start with. Industry analysts believe Beijing chose these eight regions, in particular, to further promote the use of renewable energy.
China's coal hub, Linfen, is one of the most polluted cities in the world's second-largest economy. The local government recently announced plans to extend restrictions by the third quarter as part of its scheme in lifting the city's air quality.
Heavy industries will be restricted to some degree so Linfen can achieve their goals in lessening the city's pollution rates. The decision was made after China's environment ministry said Linfen was the worst-performing city in air quality.
The environment ministry of China has also been reprimanding local governments that fail to comply with policies on cutting coal consumption. Jining, on the other hand, received a recommendation for achieving set targets in cutting smog rates and reducing coal use.
