China on Tuesday completed its first purchase of liquefied natural gas (LNG) using cross-border yuan settlement. It comes amid rising acceptance of the yuan in the international market.
China National Offshore Oil Corporation (CNOOC), the largest offshore oil and gas producer in China, purchased a shipment of LNG from TotalEnergies through Shanghai Petroleum and Natural Gas Exchange (SHPGX), according to the official WeChat account of SHPGX on Tuesday.
The transaction was completed in cross border yuan settlement and the transaction volume was about 65,000 tons. The LNG is sourced from the United Arab Emirates.
The deal, which marks the first international LNG transaction settled in yuan, is a meaningful attempt to promote multi-currency pricing, settlement and cross-border payment in international LNG trading, said Guo Xu, chairman of SHPGX. It also provides a new channel for international players to participate in the Chinese market, helping to build a new pattern of dual circulation in China.
Yu Jin, deputy general manager of CNOOC, said that yuan settlement can promote energy trade globalization and build a diversified ecosystem for LNG trading.
"In the future, CNOOC will continue to promote innovation in the international LNG trade business model," Yu said.
The yuan settlement of international LNG trading is a major event in China's market-oriented oil and gas reform, which will help promote the docking of international and domestic markets, experts said.
In recent years, the internationalization of the yuan has made remarkable progress.
The yuan has become the world's fifth-largest payment currency, the third-largest currency in trade settlement and the fifth-largest reserve currency.
The yuan accounts for 7 percent of all foreign exchange trades across the world, and has seen the biggest expansion in currency market share over the past three years, recent data showed.
With the recovery of the momentum of China's economic growth and the further opening of the financial market, the investment and hedging function of the yuan has gradually increased, experts said.
As the acceptance of the yuan increases in the international market, conditions for yuan settlement in the purchase of bulk commodities is becoming mature.
During the first China-Gulf Cooperation Council (GCC) Summit last year, Chinese authorities said that China will continue to import more crude oil and LNG from GCC countries, strengthen cooperation with GCC countries in oil and gas development and clean and low-carbon technologies, and conduct yuan settlement in oil and gas trading.
China and Russia have also moved to strengthen their energy and financial cooperation with the signing of an agreement on Russia's eastern natural gas pipeline to China, and a switch in gas payment currencies from the US dollar to the Chinese yuan and Russian ruble.
Russian President Vladimir Putin said last September that China would pay Gazprom for its gas based on a 50-50 split between the ruble and yuan, according to Sputnik News.