SAN RAMON, Calif., July 21 (UPI) -- Starting in 2018, U.S. energy company Chevron Corp. said it will start shipping liquefied natural gas to a Chinese counterpart under the terms of a new deal.
"This agreement is another important step in the commercialization of Chevron's natural gas holdings," Mike Wirth, an executive vice president at Chevron, said in a statement. "We are positioned to become one of the top 10 LNG suppliers in the world."
Chevron said it signed an agreement with a Singapore holding company controlled by JOVO, a private energy company in China. The Chinese government under the terms of the agreement will receive a half million tons of liquefied natural gas per year over the next five years, with first deliveries slated for 2018.
China is moving in favor of natural gas over crude oil as a main component of its energy mix. The government in April set a goal of raising gas to 6.3 percent of the total energy mix. Natural gas last year represented 5.9 percent of total energy consumption.
According to data from S&P Global Platts, China's five-year growth target for domestic natural gas production fell short of guidance for the period ending last year.
State-owned China National Petroleum Corp., working alongside a subsidiary of U.S. supermajor Chevron, said it started gas operations at the Chuandongbei project, producing gas taken from the Luojiazhai natural gas field.
The gas field has a production capacity of around 345 million cubic feet per day.
China is the world's second-largest economy after the United States. Demand for natural gas is expected to increase from around 6 percent of total energy consumption to more than 10 percent by the end of the decade.
The latest LNG deal is at least the third for Chevron in the Chinese market since December, when it signed with China Huadian Green Energy for the delivery of up to 1 million metric tons of LNG per year over 10 years, starting in 2020.