On Tuesday, the Shanghai Petroleum and Natural Gas Exchange announced that China has just completed its first trade of liquified natural gas (LNG) settled in yuan.
CNOOC, the Chinese state-owned oil and gas giant, and France’s TotalEnergies completed the first LNG trade settled in yuan on the exchange, according to a statement by the exchange which was reported on by Reuters.
The trade transferred roughly 65,000 tons of LNG that had been imported from the United Arab Emirates (UAE), according to the Shanghai Petroleum and Natural Gas Exchange.
TotalEnergies, a French supermajor which is among the biggest traders of LNG, confirmed the deal, and that it involves LNG imported from the UAE, however they offered no further details on the matter.
China has long sought to perform more trade deals in yuan, as a way of elevating the importance of its currency on the global markets, and challenging the US dollar’s dominance as a tool of international trade settlement, including among energy trades.
Chinese President Xi Jinping had proposed that the Arab Gulf nations should use the Shanghai Petroleum and National Gas Exchange to perform yuan settlements of oil and gas trades during his historic visit to Riyadh in December.
During the trip, Xi said, “China will continue to import large quantities of crude oil from GCC countries, expand imports of liquefied natural gas, strengthen cooperation in upstream oil and gas development, engineering services, storage, transportation and refining, and make full use of the Shanghai Petroleum and National Gas Exchange as a platform to carry out yuan settlement of oil and gas trade.”
Although China’s yuan has made inroads into global trade, it still only accounts for 2.7% of all settlements, compared to the 41% share of the US dollar.
Much of the increase in trading in yuan began as Russia was forced to start trading in the currency following Western sanctions levied in the wake of the war in Ukraine. As the Russian trade in energy was targeted by sanctions, Russian President Putin was forced to begin trading in the Chinese currency as a way to reduce his country’s exposure to the US dollar and the euro.
