Is China changing the LNG market?
China has resold at least three shipments of US LNG to Europe, attracted by the possibility of huge profits. All the details
Unipec, a Chinese trading company linked to the Sinopec petrochemical company, has sold at least three shipments of liquefied natural gas (LNG) from the United States to Europe.
WHAT WE KNOW
There is little information available. However, we know that these cargoes will arrive in European ports in the summer and that they will depart from the terminal of Calcasieu Pass, in Louisiana, of the American company Venture Global LNG.
The United States is the largest liquefied gas exporter in the world. While Venture Global had been talked about last December for the signing of two long-term LNG supply agreements with a division of CNOOC, a Chinese state-owned petrochemical company.
A MARKET CHOICE, NOT A GEOPOLITICAL MOVE
Behind the Chinese move there is no strategic calculation or political coordination with America (similar to that achieved with Japan , so to speak) for the supply of fuel to Europe, which wants to focus on LNG to detach itself from gas. Russian via plumbing.
Beijing's decision is unusual, however, for two reasons. First of all, because the country has decided to resell those loads of LNG rather than keep them for itself (it is the largest importer in the world). Secondly, because it has chosen to sell them in Europe rather than in Northeast Asia, where gas prices are generally higher than in the European market. But the situation has changed for some time: precisely due to the energy crisis in the Old Continent, in fact, at the end of December even the American LNG exporters had diverted the route of some LNG carriers to direct them to Europe, attracted by the possibility of higher revenues.
The war in Ukraine and fears of an interruption in flows from Russia , which is worth 40 per cent of EU imports, have pushed European gas prices to record levels. Unipec then wanted to take advantage of the situation to make higher profits than those offered by the Chinese domestic market.
MARKET MUTATION?
The news – in summary – is relevant because it tells of a change in the dynamics of the LNG market: it is still too early to say whether it will be temporary or structural, but the high prices of Europe are bringing here the loads of gas that usually go to Asia . Chinese authorities, however, have asked companies to increase gas imports to replenish their stocks in anticipation of possible supply disruptions caused by the war.
THE NEW ROLE OF CHINA
The long contracts signed with American suppliers, which guarantee the country volumes in excess of its domestic needs, could make China a powerhouse in the exchanges of liquefied gas on the markets.
Today it is the largest importer, with 79 million tons in 2021, a record. But Chinese trading companies – starting with Unipol, already an important oil trader – are acquiring an increasingly international profile and increasing their presence in the commercial hubs of London and Singapore.
Analysts estimate that in 2027 the spot LNG trade will be worth 20 billion dollars, more than double the figure reached in 2020.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/cina-gnl-mercato/ on Sat, 19 Mar 2022 07:47:28 +0000.