Why Chinese imports of US LNG have collapsed

As European LNG buyers snap up shipments from the United States in a race to replace Russian pipeline deliveries, America has become a major supplier to Europe, and its sales to China have soared. reduced to a few shipments shipped so far this year. Chinese LNG imports from the United States fell 95% between February and April compared to the same period in 2021. Meanwhile, Chinese LNG imports from Russia jumped 50%, according to data from the chinese customs quoted by The Wall Street Journal.

This is a major change in US LNG shipments to China. The United States was the largest supplier of LNG spot volumes to China last year, the EIA said last month.

So far this year, the United States has occasionally sent LNG shipments to China, but most exports have gone to Europe, which pays more for spot LNG supply.

In April 2022 alone, five European countries – France, Spain, the UK, the Netherlands and Poland – accounted for 54.1% of total US LNG exports, according to US Department data. Energy show Last week.

The European Union and the United Kingdom have seen a record high LNG imports in April as higher spot prices in Europe relative to Asia attracted suppliers with destination flexibility to ship LNG to Europe. Those vendors were mostly from the United States, the EIA said earlier this month.

The Russian invasion of Ukraine and Europe’s determination to end its dependence on Russian energy are changing global energy flows, not only in oil but also in gas.

Europe is pricing Asia for spot deliveries and is turning to mostly American LNG to reduce its still-heavy reliance on Russian gas. At the same time, China is buying more LNG from Russia, which the West does not want to touch. High LNG spot prices and lackluster demand due to China’s zero-COVID lockdowns have significantly reduced Chinese appetite for US LNG this year.

Related: India’s top refiner sees oil staying above $100 this year

Yet China’s scant U.S. LNG imports won’t persist for years, as major Chinese states and other energy companies have signed long term offers with US exporters in recent months. Some of these LNG deliveries will begin as early as 2022 and 2023.

Nevertheless, global energy trade flows are changing, and they are changing for good. Europe will not revert to Russian energy and is on an irreversible path to cut dependence on Russian oil and gas, sooner for oil than for gas.

Banned, sanctioned and shunned in the West, Russia is now turning to the East to sell its energy. Analysts warn, however, that Russia, which has no other choice, could become too dependent on China, particularly for its gas sales. Moreover, the volumes of pipelines and LNG that Russia sends to China represent only a fraction of Russian pipeline exports to Europe, even if Russia cut gas supply to Europe in recent weeks.

Russia already sends natural gas by pipeline to China via the Power of Siberia pipelinewhich became operational at the end of 2019. Another major pipeline is expected to deliver gas from Russia to China, but it will take years to be completed and commissioned.

The European gas market remains much larger and much more lucrative, said Nikos Tsafos, holder of the James R. Schlesinger Chair in Energy and Geopolitics of the Energy Security and Climate Change Program of the Center for Strategic and International Studies (CSIS).

“Russia could eventually build a significant business geared towards Asian markets, but change will not be immediate or easy, and it will critically depend on foreign partners, including China,” Tsafos wrote in an analysis last month. .

“To get a contract with China, Russia had to come up with a deal: China pays much less for Russian gas than Europe,” he added.

By Tsvetana Paraskova for Oilprice.com

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