Sinopec signs 10-year SPA with Qatar Petroleum Report

Insight 01 April 2021

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Report summary

On 22 March, Chinese NOC Sinopec signed a 2-mmtpa SPA for 10 years with Qatar Petroleum. Compared to its NOC peers, Sinopec is the least contracted, allowing the firm to participate actively in the spot market. The addition of Qatari LNG will help Sinopec to diversify supply options and support its regas expansion. As the deal will source from QatarGas-1, which delivers rich LNG. Sinopec will likely value this in the opportunity to strip C2+ to manufacture ethylene, generating additional cash for the group's business. Following the Sinopec deal, China now has 10 mmtpa of supply contracted from Qatar. China and Qatar Petroleum will likely sign further deals in the future. Nevertheless, China will also look for other gas sources to reduce import dependence on one single country.

Implications
- Diversifying supply options to support Sinopec's downstream expansion
- Rich Qatari LNG could bring additional revenue to Sinopec
- not purely economic driven when it comes to long-term contracting
- Contracted volumes from Qatar now at 10 Mt, but it's the first deal directly with Qatar Petroleum