China's ZhenHua Oil, ADNOC sign 5-year LNG SPA with prices linked to JKM, Brent

State-owned oil and gas company China ZhenHua Oil Co. Ltd. has signed a five-year sales and purchase agreement with the Abu Dhabi National Oil Co. for the supply of about 800,000 mt, or 12 cargoes, per year of LNG starting in 2026, according to a source familiar with the deal.

The transaction price of the SPA is based on a delivered ex-ship (DES) basis, consisting of two components: one linked to the Platts Japan Korea Marker (JKM) and the other linked to the price of Brent oil, the source said. Platts is part of S&P Global Commodity Insights.

ZhenHua Oil did not respond to a request for official comment on the matter.

ADNOC declined to confirm the deal over the phone but directed Platts to its official X handle. An ADNOC post on the handle late April 17 said that ADNOC Group CEO and Managing Director Sultan Ahmed al-Jaber met with Zhenhua Oil Chairman Wang Yuitao "to discuss ways to strengthen their partnership to help meet China's growing energy needs."

In a separate email response, ADNOC shared an X post from April 19 that said: "Three LNG supply agreements signed with Chinese partners, including the largest LNG supply agreement between the UAE and China by volume, will further strengthen ADNOC's position as a leading global energy supplier."

Partnership and infrastructure

This marks ZhenHua Oil's first long-term LNG supply contract. The cargoes will be delivered to the Jiangsu Guoxin LNG receiving terminal in Rudong County, Jiangsu Province, which is being jointly constructed by ZhenHua Oil and its partners.

ZhenHua Oil holds a 34% stake in the Jiangsu Guoxin LNG terminal. The other shareholders include the provincial government-owned Jiangsu Guoxin Investment Group Ltd. with a 51% stake, Anhui Provincial Natural Gas Development Co. Ltd. with 10%, and Jiangsu Yangkou Port with 5%, according to publicly available industrial and commercial registration information.

The Jiangsu Guoxin LNG terminal is expected to enter trial operations in the first quarter of 2026, according to the source.

This is the first LNG terminal project that ZhenHua Oil has invested in since starting its LNG business in 2018.

The LNG project comprises two components: the Jiangsu provincial LNG storage and peak-shaving facility, and the Guoxin LNG receiving terminal, which is scheduled to complete construction by the end of 2025.

The first component includes three LNG storage tanks, each with a capacity of 200,000 cu m, along with associated facilities. The second component features one 200,000 cu m LNG storage tank and a specialized dock capable of accommodating LNG vessels ranging from 80,000 cu m to 266,000 cu m.

Once operational, the Jiangsu Guoxin LNG terminal is expected to achieve an annual turnover of 6 million mt of LNG and a daily gasification output of 60 million cu m, sufficient to meet three days of emergency gas demand for the entire province, according to the local government.

ZhenHua Oil is a subsidiary of the state defense company China North Industries Group Corp. (Norinco). It primarily specializes in oil and gas exploration and production, oil industry investment, international oil trading, refining and storage, and transportation of crude oil and oil products, according to the company's website.

To sustain its LNG business in the domestic market, ZhenHua Oil has typically sourced spot LNG cargoes or cargoes under medium- and short-term contracts. It has secured LNG terminal slots either through auctions or entered into medium-term LNG terminal access agreements with state-owned CNOOC and PipeChina.

On April 19, ENN Natural Gas Co. signed a 15-year SPA for the supply of 1 million mt/year of LNG with ADNOC, Platts reported earlier, citing an official post from the Shanghai-listed city-gas distributor and terminal operator on its WeChat account.

ADNOC also announced in the April 19 X post that it has established an office in China, calling it "a significant step in its efforts to strengthen its long-term energy partnerships with its customers and partners in the People's Republic of China," as its ties with China deepen. The opening ceremony took place on April 18.

In November 2024, ADNOC L&S, a subsidiary of ADNOC, took delivery of the first of six 175,000 cu m LNG carriers it ordered from China's Jiangnan Shipyard in 2022, with the remaining vessels scheduled to be delivered in the coming years.