China opens its market for American liquefied natural gas

A terminal for receiving liquefied natural gas in the Chinese port of Tianjin

Russian companies have increased competition in the Chinese market.

Beijing gave the green light to increase procurement in the U.S. liquefied natural gas (LNG). The Ministry of Finance of China published on 18 February a list of 696 titles of American goods imported on March 2 during the year will not be subject to protective tariffs imposed in response to similar action in the United States. In the list, along with numerous agricultural products, included also the energy resources, reports DW.

Beijing obliged to buy us LNG

Thus, the Chinese side is fulfilling the commitments undertaken in the framework of the agreement on the first phase of the bargains of the U.S.-China. It was signed in Washington on January 15 after a year and a half of a trade war between the two countries. This document commits Beijing sharply, by at least $ 200 billion over two years to increase imports of American products. In particular, the procurement of energy resources from the United States, namely crude oil, petroleum, gas and coal, is expected to grow during this period compared with the 2017 year to 52.4 billion dollars.

The implementation of this agreement will lead to the fact that the United States of America in 2021 can become a major energy supplier to China, overtaking and significantly surpassing Russia, immediately after the conclusion of the transaction estimated researcher of the Institute of German economy in Cologne (IW) ber Sonia (Sonja Beer).

In an interview with DW, she stressed that in the case of reduction of duties on American LNG, what at that time still had no confidence, China can start hard to buy in USA it. “This, in turn, could have a negative impact on Australia and Qatar, and the prospects of increasing the supply of Russian gas to the Chinese market,” said Sonia ber.

Russian deliveries to China: falling demand and force majeure

Russia sells to China as liquefied natural gas company NOVATEK delivers in tankers from his Arctic enterprise “Yamal LNG”, and “Gazprom” – from one of the factories of the project “Sakhalin-2” piping. It Gazprom exports through the pipeline “Power of Siberia”. He was commissioned in December 2019 and now is gradually increasing its export volumes. Taken at Beijing, the decision to abolish protective duties on American LNG means that both Russian companies since March can feel the increased competition in the Chinese gas market.

Moreover, purchases in the United States will begin in the conditions of let and temporary, but significant reduction in Chinese demand for energy caused by the epidemic of the coronavirus and unprecedented quarantine measures that largely paralyzed in China traffic and industrial production. In this situation, the Chinese energy company even began to abandon the contracted volumes of LNG, citing force majeure. At the same time deal with the United States obliges China this year to increase purchases of American energy 18.5 billion.

As a result of March, most likely, will increase the redirection of liquefied natural gas from Qatar, Australia and other countries in the European market and reduce the interest of China to increase purchases of pipeline gas from Russia. All this will further exacerbate emerged this year problem of “Gazprom” in Europe. And European consumers to ensure the preservation of especially low prices for natural gas.