Because China will warm up with US liquefied gas
China is signing many long-term LNG supply contracts, relying above all on its rival superpower: the United States. Here are advantages and risks for Washington and Beijing
Cheniere Energy, a major US exporter of liquefied natural gas (LNG), reached a 20-year supply deal this week with a Chinese company, ENN Natural Gas.
THE CONTRACT WITH QATARENERGY
China has recently signed several long-term LNG purchase contracts. One just last week, lasting twenty-seven years, between the oil company CNPC and the Qatari state energy company QatarEnergy; petrochemical group Sinopec had done the same in November 2022.
CHINA CHOOSES LNG AND LONG-TERM SUPPLIES
LNG is useful for China to reduce coal consumption and reduce its greenhouse gas emissions (it is the country that produces the most, about 30 percent of the world total). Long-term contracts allow the country to guarantee the certainty of supplies in the long term and protect itself from the volatility of prices on the spot, daily and wholesale markets which are most affected by geopolitical crises and fears about supply.
As Quartz notes, China is targeting a small number of LNG supplier countries: Australia, Russia, Qatar and the United States. But those that will contribute most to the growth of Chinese liquefied fuel imports will be Qatar and America, according to a recent report by the Oxford Institute for Energy Studies .
THE ENERGY TRADE BETWEEN THE UNITED STATES AND CHINA
In 2021, despite economic and strategic competition, US LNG exports to China hit record levels. In 2022 there was a decline, however due in part to the Chinese economic slowdown due to the zero-COVID policy. In Washington – writes Quartz – even the toughest politicians with China are in favor of this energy trade to support the growth of the oil & gas industry.
– Read also: How is the trade separation between the United States and China proceeding?
Data from the Oxford Institute for Energy Studies say that, in fact, Americans will export a lot of LNG to China in the next few years.
The United States accounted for 43 percent of the fuel purchase agreements signed by Chinese companies in 2021 and 2022. Qatar follows at a distance, with 29 percent. Russia's share is just 9 percent.
NOT ONLY LNG: OIL TRADES ARE ALSO STRONG
Moreover, Chinese imports of crude oil and US oil derivatives are also growing, favored by cheaper prices compared to the international benchmark Brent. In March 2023, Refinitiv analysis cited by Reuters said, US oil exports to China hit a two-and-a-half-year high; in April it was 850,000 barrels per day, the highest since May 2020.
BENEFITS AND RISKS: THE MEIDAN ANALYSIS (OXFORD INSTITUTE)
Michal Meidan, author of the Oxford Institute for Energy Studies study on China's energy policy, wrote that “in the future, the United States and China will be increasingly interdependent when it comes to oil and gas. While this creates opportunities, it also creates vulnerabilities for both sides: the United States could limit oil and gas flows to China, thus affecting the availability and cost of these resources, but this would harm commercial interests Americans".
– Read also: Will Europe depend on the United States for energy?
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/cina-stati-uniti-commercio-gnl/ on Sat, 01 Jul 2023 05:30:42 +0000.