Australian energy giant Woodside has officially signed a 15-year LNG sales and purchase agreement with China Resources Gas International Limited (CR Gas). Starting in 2027, Woodside will supply 600,000 tons of liquefied natural gas (LNG) annually to China. This marks Woodside's first direct contract with a Chinese end customer, bypassing intermediaries, and signals the new phase of China-Australia energy cooperation entering a "de-commercialized" stage.

Mark Abbotsford, Chief Commercial Officer of Woodside, stated: "CR Gas, as one of China’s largest urban gas operators, with a terminal network covering 300 million people, will enable this collaboration to establish a complete industry chain from Australian gas fields to Chinese kitchens."

Strategic Landscape: The Reshaping of Asia's Energy Map

• China's Energy Security Breakthrough: China’s LNG import volume is expected to exceed 89 million tons in 2024. Amid intensified Sino-U.S. energy tensions, securing long-term contracts with Australia can hedge risks of U.S. shale gas supply interruptions.

• Woodside's Asian Ambitions: Since 2024, Woodside has signed four long-term contracts in Japan, South Korea, and Vietnam. Its LNG sales to Asia will account for over 65% of total sales.

• China-Australia Relationship Milestone: Following a cooling in iron ore trade, LNG has become the new economic anchor between the two nations.

Pricing Mechanism: Tied to JKM or Brent?

• Supply Security Bottom Line: When the JKM (Asian LNG spot index) exceeds $25/MMBtu, a discount coefficient will be applied.

• Profit Safeguard: If Brent crude falls below $70/barrel, a price compensation mechanism will be activated.

This design helps mitigate the volatility of China's import costs while ensuring that Woodside can achieve reasonable returns during periods of low gas prices.

Impact: Accelerating Global LNG Trade Flow Eastward

• U.S. Gas Exporters Under Pressure: U.S. exporters such as Cheniere have weakened their negotiation leverage for long-term contracts with China.

• Shipping Pattern Changes: The shipping route from China to Australia is only 10 days, compared to 20 days from the U.S. West Coast to China. More LNG ships will focus on Pacific routes.

• Carbon Tariff Strategy: Woodside has pledged to reduce LNG carbon intensity by 30% by 2030, helping CR Gas navigate the European Union’s Carbon Border Adjustment Mechanism (CBAM).

The Next Decade: Super Transformation of China's Urban Gas Giants

• Farewell to the Era of High Profits: With domestic residential gas prices regulated, profit margins are compressed, necessitating an upstream extension.

• Hydrogen Energy Positioning: By upgrading LNG infrastructure, companies will set up hydrogen receiving stations to seize early opportunities.

• Virtual Pipeline Strategy: Leveraging long-term contracts to integrate small and medium-sized gas companies and build a nationwide virtual transmission and distribution network.