The U.S. Energy Department cautioned Freeport LNG Development LP against signing up Chinese customers for the company’s planned liquefied natural gas export terminal in Texas, Chief Executive Officer Michael Smith said.

“Early on in our project, we were quite frankly warned by the Department of Energy that it would not be looked at as politically correct for us to have a large Chinese customer,” Smith said Thursday at the FT Energy Strategies Summit in New York. “One of the largest Chinese customers wanted a full train,” or processing plant, he said.

In return for signing LNG purchase agreements, Chinese buyers demand equity stakes, which they say are required by their lenders, Smith said. Aside from Cheniere Energy Inc.’s Sabine Pass terminal, which has an investment from a Hong Kong-based company, no U.S. export projects have disclosed Chinese customers, according to ADI Analytics LLC in Houston. That contrasts with Canada, where Chinese investors are key backers of export projects.

A glut of natural gas production from shale reservoirs has spurred dozens of projects to export LNG. The U.S. may become a net exporter of gas by 2017, government data show. In China, the third-largest market for LNG, demand for gas as a cleaner alternative to coal and oil for power generation is rising.

Natural gas for June delivery rose 2.5 percent to settle at $3.008 per million British thermal units Thursday on New York Mercantile Exchange. Prices are higher in Asia, where contracts are linked to oil prices. Japan’s LNG imports averaged $11.55 per million Btu in March.

The Energy Department has given final authorization to six projects, including Freeport’s, to export LNG to countries lacking a free trade agreement with the U.S. The terminals would have a combined capacity of 8.61 billion cubic feet a day, or about 12 percent of current dry gas production.

“Authorizations are granted to the companies that apply, not for the countries themselves,” Lindsey Geisler, a spokeswoman for the Energy Department in Washington, said Thursday. “The final destinations for LNG cargoes will be dependent upon commercial arrangements and factors, and are only reported to the Department after delivery.”

The only countries that can’t receive exports are those prohibited by U.S. law or policy, Geisler said by e-mail.

Cheniere’s Sabine Pass in Louisiana, scheduled to begin service in the fourth quarter, would be the first to ship cargoes overseas from the contiguous U.S. The $14 billion Freeport project would send up to 2 billion cubic feet of gas a day to customers including Japan’s Osaka Gas and Chubu Electric after it starts in September 2018.

Diplomatic tensions, including China’s ties to North Korea and claims over disputed islands in the South China Sea, may have made the Energy Department wary of Chinese involvement in U.S. projects, Zach Allen, president of Pan Eurasian Enterprises Inc., a Raleigh, North Carolina-based tracker of LNG shipments, said by e-mail Thursday. Only Japan and South Korea import more LNG than China, Allen said.

If the department did advise Freeport not to seek Chinese customers, “the comment made by DOE was, in my judgment, ill-advised and probably made in the expectation of not being cited publicly, but perhaps to gently dissuade Mr. Smith from entertaining a Chinese terminal user,” Allen said.

Canadian LNG projects have attracted Chinese investors, who have bought gas supplies in the field and taken stakes in potential pipelines and shipping terminals. Royal Dutch Shell Plc’s project along the Pacific Coast counts China’s state-owned PetroChina Co. as an investor. Cnooc Ltd., another Chinese state-owned company, has a less advanced Canadian LNG proposal with Inpex Corp. and JGC Corp., both of Japan.