China is close to becoming the world’s largest importer of liquefied natural gas (LNG) in 2023, as it appears to be working to avoid a repeat of future energy shortages.
According to data compiled by Bloomberg, Chinese companies have agreed to buy more gas on a long-term basis than any single country.
The government is backing the efforts of its refineries to sign long-term deals, and even invest in export facilities, to boost energy security until mid-century, according to people who met with policymakers.
Toby Kupsen, global director of trading and advisory at Trendant LNG in Shanghai, says, “Energy security has always been a priority for China… Having ample supply in its portfolios helps it manage any future volatility, and I expect to see more purchases.”
China is struggling economically despite hopes of rapid and high growth. Slowing consumer spending, a crisis-ridden real estate market, falling exports, record youth unemployment, and soaring domestic government debt have hampered the Chinese economy.
In addition to rising debt levels among local governments, there are growing concerns about cutting growth-focused projects to pay the bills.
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China’s imports of liquefied natural gas rose during the month of May, increasing for the fourth consecutive month by 31.5 percent compared to the same month last year 2022, according to a report published by the specialized platform “LNG Prime”.
During the first 5 months of 2023, China’s LNG imports reached 27.54 million tons, up 4.3 percent year on year, according to data from China’s General Administration of Customs.
Coal shortages – the main fuel for China’s power generation – led to large-scale electricity cuts for factories for brief periods in 2021 and 2022, slowing economic growth. In response, the country pledged to increase exploration capacity, and production rose to record levels, enabling it to stockpile and reduce imports.
China is witnessing a boom in energy infrastructure projects, as Beijing has completed the construction of the longest deepwater oil and gas pipeline, which it relies on to boost production and meet growing domestic demand for the two strategic commodities.
The diversification of gas imports from many countries comes as part of China’s strategy to achieve energy security, as it provides protection from any further geopolitical turmoil.
China gas contracts
Last month, China National Petroleum Corporation (CNPC) struck a 27-year gas supply agreement with Qatar and bought a stake in a major expansion project being carried out by the exporting country, according to a Bloomberg report.
At the same time, ENN Energy Holdings signed a contract with Chenir Energy. Shipments for both contracts are scheduled to begin by 2026.
Other deals are in the works, with negotiations stretching from Singapore to Houston. State giants such as CNOC and Sinopec are also in negotiations with the United States.
Smaller companies such as Energy Group in Zhejiang Province and Gas Group in Beijing are also looking for deals, according to traders who also added that Qatar is in negotiations with many Chinese buyers over sales contracts that could span more than 20 years.
The deals will help support nearly 12 new import terminals set to begin construction across China’s coastal cities this decade.
Norwegian consultancy Rystad Energy expects the country’s LNG imports to rise to 138 million tons by 2033, about double current levels.
The deal-making efforts will help support global export projects and enhance the role seaborne fuels will play in the energy mix. As suppliers move to attract Chinese importers, Beijing’s influence in the market is set to increase.
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