(Reuters) – U.S. liquefied natural gas (LNG) company Cheniere Energy Inc said on Friday it had signed a 25-year deal to supply Taiwan’s CPC Corp, which CPC valued at roughly $25 billion.
Cheniere said it will sell 2 million tonnes of LNG per year on a delivered basis to the state-owned oil and gas company, starting in 2021. It said the purchase price will be pegged to the Henry Hub monthly average, plus a fee.
A CPC spokesman said the $25 billion figure was based on current prices.
The deal is viewed as an important part of Taiwan’s efforts to diversify its energy resources and reduce its trade surplus with the United States, according to a source familiar with the government’s thinking.
The contract is a significant boost to Taiwan’s trade relations with the United States, particularly given the Trump administration’s focus on trade with Asia, the source said.
The United States has become a major LNG exporter in the last two years, mostly due to the ramp up of Cheniere’s Sabine Pass terminal in Louisiana. The Houston-based company is also building the Corpus Christi terminal in Texas.
The CPC deal, which is through Cheniere’s marketing arm, is not tied to a particular project or liquefaction train.
Cheniere said the agreement ties up a portion of its portfolio volume on a long-term basis with a investment grade counterparty. The company also retains the ability to use those volumes to support a future train or expansion project.
Cheniere announced in May that it was moving ahead with a third liquefaction train at its Corpus Christi project. It is currently marketing its sixth train at Sabine Pass, with an investment decision expected next year.
Taiwan is the world’s fifth biggest importer of LNG, shipping in almost 16.8 million tonnes in 2017, according to the International Gas Union, giving the island a global import market share of almost 6 percent.
Reporting By Jess Macy Yu in Taipei and Julie Gordon in Vancouver; Additional reporting by Henning Gloystein; Editing by Neil Fullick and Kim Coghill