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SINGAPORE: China’s Sinochem Group is in advanced talks with state-owned PipeChina for using the energy infrastructure firm’s liquefied natural gas (LNG) terminals after it struck a US deal to buy the superchilled fuel, people with knowledge of the matter said.

The move comes after state-owned Sinochem, traditionally an oil and chemicals trader, announced its first-ever deal earlier this month to buy LNG from Cheniere Energy.

A deal for terminals with China Oil and Gas Pipeline Network, or PipeChina, is an important step in Sinochem’s growth ambitions for LNG. For PipeChina, Sinochem will constitute a stable LNG customer and help offset weak demand from smaller importers due to volatile prices of the fuel.

China, which overtook Japan as the world’s No.1 buyer of LNG this year, sees natural gas as a key bridge fuel along its path to reach carbon neutrality by 2060.

Sinochem and PipeChina did not immediately respond to requests for comment.

Sinochem aims to sign long-term deals to use PipeChina’s terminals, including the new 6 million tonne per year (tpy) facility in Zhangzhou, Fujian province, that’s due to start next year, said the sources, who requested anonymity because they’re not authorised to speak to media. “The company may start with trading, while also anchoring on a few domestic outlets within its own system,” said Chen Zhu, managing director at consultancy SIA Energy. One such outlet would be Sinochem’s wholly owned refinery complex in Quanzhou, near Zhangzhou, that will utilise gas to make hydrogen used for refinery and petrochemicals processing, the sources said.

As PipeChina opens up terminals to firms outside state majors like PetroChina, poor contractual performance by smaller importers in a volatile spot market is adding to the appeal of Sinochem.

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