French oil and gas giant Total and Shanghai-based Shenergy Group have signed binding agreements for the supply of up to 1.4 million tons per annum of liquefied natural gas from Total, as well as the creation of a joint venture to expand LNG marketing in China.

The joint venture will sell LNG, supplied by Total, to customers in Shanghai and throughout the neighboring Yangtze River Delta regions, one of the main LNG markets in China.

Total also will supply LNG to Shanghai Gas, the natural gas subsidiary of Shenergy Group, for its distribution business.

"This deal with Shenergy Group is a great opportunity to partner with an experienced gas & LNG player with strong ambitions, as well as a unique entry point into the downstream LNG market in China," said Stéphane Michel, president of Gas, Renewables & Power at Total.

"This partnership is in line with our strategy to grow along the entire gas value chain. LNG is playing a key role in meeting the growing demand for natural gas, especially in China, where we are pleased to contribute to the diversification of the energy mix."

The LNG supply to the JV and Shanghai gas distribution business will be sourced from Total's global LNG portfolio through a long-term LNG sale and purchase agreement ramping up to 1.4 million tons per annum for a term of 20 years. It will be delivered to Shenergy's Chinese LNG terminals.

"The Shenergy Group is very pleased to sign this partnership agreement with Total, which secures a long-term, reliable supply of LNG for the Yangtze River Delta," said Wang Zhehong, vice-president of Shenergy Group and chairman of Shanghai Gas.

"The joint venture with Total will develop the LNG downstream market and support the objective of Shenergy Group to improve the air quality and reduce emissions in the region."