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China’s US gas tariffs a win for our LNG suppliers

China has placed a 10 per cent tariff on gas imports from the US, handing Australian LNG exporters price and investment advantages over their main rival for the growing Chinese market.

The move by China to impose tariffs on more than 5000 US imports, including LNG, was in response to US President Donald Trump on Monday imposing 10 per cent tariffs, to rise to 25 per cent at year-end, on a suite of Chinese imports.

New LNG projects usually go ahead with the backing of big customers that not only commit to long-term gas purchases but also invest in the project.

Chinese gas buyers now face a 10 per cent price penalty with US gas, that may jump to 25 per cent if China matches Mr Trump’s move in December, eroding their returns both as a gas buyer and a project investor.

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LNG Limited is an ASX-listed but Houston-based proponent of a $US4.35 billion ($6 billion) LNG project in Louisiana looking to go ahead in December.

LNG Limited chief executive Greg Vesey, according to Bloomberg, said that he expected Chinese buyers would wait for certainty on tariffs before signing contracts.

Overall Australia is likely to lose from the trade war between its biggest and third-biggest trading partners, China and the US, but local LNG player Woodside Petroleum may benefit.

Woodside chief executive Peter Coleman wants his company and its partners to approve the $US11 billion Scarborough project in 2020 and a $US20.5 billion spend the year after to bring Browse gas to shore.

With Mr Trump in the White House until at least early 2021, investors may see Australia having economic and sovereign risk advantages over the US.

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