PetroChina and Sinopec Seek Long-Term LNG Deals to Bypass Hormuz
China's LNG purchases from Qatar collapsed 98% in Q2 2026, pushing its state buyers into decade-long supply negotiations with Hormuz-free exporters.
China imported roughly 100,000 tons of LNG from Qatar in the second quarter of this year, down from as much as 4.7 million tons in the same period of 2025, according to ship-tracking data compiled by Bloomberg. The quarterly collapse is a near-complete suspension of flows from the supplier that provided nearly 30% of China's LNG as recently as last year.6
PetroChina and Sinopec are now in active talks with exporters for long-term supply contracts beginning before 2030 and running for at least ten years, Bloomberg reported Thursday (2026-07-17), citing people familiar with the discussions. The negotiations are focused on exporters whose supply routes do not require transit through the Strait of Hormuz.6
Qatar exports via Hormuz, and the combination of the Iran war curtailing Qatari output and elevating transit risk has left Chinese state buyers exposed in a way that quarterly spot trading cannot remedy. Signing long-term contracts with Atlantic or Pacific Basin exporters is the structural hedge against a disruption that has already demonstrated it can run for quarters rather than weeks.6,5
A swing of roughly 4.6 million tons over three months needs to be sourced somewhere else, deferred or met from storage. China managed Q2 partly by consuming accumulated stocks rather than competing aggressively for spot cargoes. Beijing's observable crude stockpile stood at a record 1.2 billion barrels as of May 2026, according to Kayrros, and the country is estimated to hold around 1.4 billion barrels in total hydrocarbon storage. That buffer bought time. It does not eliminate the structural incentive to replace lost Qatari baseload.6,2,1
Spot exposure at scale is expensive. JKM, the Asian LNG benchmark, was at $20.98/MMBtu as of Friday's close (2026-07-18). Long-term contracts, typically priced off oil linkages or fixed formulas, offer baseload buyers a more predictable cost structure than the spot market can provide for the hundreds of cargoes Chinese utilities and industrial users need annually. Signing before 2030 also secures capacity from projects currently in development, many of them in the United States, before those projects are fully subscribed by other buyers.6,5
US LNG is the most visible alternative. American export projects ship via the Atlantic and Pacific without any Persian Gulf transit requirement, and a significant wave of capital is targeting that capacity. For Chinese state buyers, US supply carries political risk, including tariff uncertainty and export licence constraints. But the immediate comparison is against a Qatari source that has effectively gone offline for three consecutive months.5
China's broader role in the LNG market complicates the picture. Over the past year, Chinese buyers behaved more as price-responsive traders than baseload anchor buyers, adjusting purchases based on JKM levels rather than fixed schedules. Wood Mackenzie analysts described that shift as China moving from a demand sink to a market balancer. The Hormuz-bypass contract talks suggest that approach is being qualified: strategic supply security for a defined volume tranche is worth locking in regardless of spot economics.4
Total LNG deliveries to China did recover to 4.9 million tons in May, marginally above year-earlier levels per Bloomberg ship-tracking data, showing the country replaced some of the Qatari shortfall through other suppliers. Aggregate volumes, though, mask the source concentration problem.3
The risk for exporters bidding into this demand is a faster-than-expected recovery of Qatari supply. If an Iran ceasefire reopens Hormuz transit and allows Qatari production to rebuild toward pre-war levels, Hormuz-bypass capacity contracted by PetroChina and Sinopec would compete directly with restored Qatari volumes. How much premium Chinese buyers are willing to accept for supply-chain diversification over pure cost optimisation is what the current negotiations will ultimately settle.5,6