China is on a natural gas buying spree like there is still an energy crisis

Beijing: China is on a natural gas buying spree, and officials are happy to see importers keep deals even as the global energy crisis subsides, Bloomberg reported.

To strengthen energy security by the middle of the century, the government is planning efforts by state-owned buyers to sign long-term contracts and even invest in export facilities, according to people who have been meeting with policymakers. continues to support.

The country is on track to become the world’s top importer of liquefied natural gas in 2023. And for the third year in a row, Chinese companies are agreeing to buy more of it on a long-term basis than any single country, data compiled show.

China is thinking well to avoid the repetition of energy shortage in the future, while also trying to promote economic development. Long-term LNG contracts are attractive because shipments are promised at a relatively stable price compared to the spot market, where gas has risen to its highest since Russia’s invasion of Ukraine.

“Energy security has always been a priority for China,” said Toby Copson, global head of trade and advisory at Trident LNG in Shanghai. “Having enough supply in their portfolio helps them manage future volatility. I look forward to seeing more.

The deal-making efforts will help boost global export projects, thereby strengthening the role of marine fuels in the energy mix. And as suppliers step up to lure Chinese importers, Beijing’s influence in the market is bound to grow.

After improving relations with the US, China began pushing for long-term contracts in 2021. While imports declined last year partly due to weak demand amid Covid restrictions, the drive resumed after Chinese buyers cut pipeline gas to Europe following the invasion of Ukraine.

The resulting high prices and global competition for the super-chilled fuel provided a quick lesson in the need for a stable supply. Part of China’s effort for energy security is to diversify imports among different countries as a measure against further geopolitical disruptions.

Several other importers, including India, are also looking to sign more deals to avoid future shortages and reduce dependence on spot deliveries. Yet China is closing contracts at a very rapid pace. According to Bloomberg calculations, 33% of long-term LNG volumes signed so far this year have gone to China.

Last month, state-owned China National Petroleum Corporation signed a 27-year deal with Qatar and took a stake in the exporter’s massive expansion project, while ENN Energy Holdings Ltd signed a decades-long contract with US developer Cheniere Energy Inc. Supplies from both the contracts are expected to commence by 2026.

Boardroom conversations from Singapore to Houston lead to more deals. State-owned giants including Cnooc Ltd and Sinopec are in discussions with the US, according to traders, while smaller companies such as Zhejiang Provincial Energy Group Co and Beijing Gas Group Co are also looking for deals.

Traders said Qatar is in talks with several Chinese buyers for sales contracts that could last more than 20 years. Bloomberg reported in May that Sinopec is among companies in talks to invest in gas development in Saudi Arabia, which could include building facilities to export the fuel.

The deals will help support nearly a dozen new import terminals that are due to begin construction in China’s coastal cities this decade. According to Norwegian consultant Rystad Energy, the country’s LNG imports could rise to 138 million tonnes by 2033, nearly double the current level.

“Currently, more than half of China’s LNG demand from 2030 to 2050 remains uncontracted,” said Rystad analyst Xi Nan. Traders said the government was not forcing companies to sign deals and traders would sign only those agreements whose prices were attractive. Chinese buyers are also using the new LNG contracts to expand portfolio and unlock lucrative business opportunities.

However, the bullish demand outlook is not certain, especially as China boosts gas production domestically, while overland shipments from Russia could increase as new pipelines are built. Xie Zhuguang, senior analyst at Cnooc, warned last month that the oversupply risks increasing the risk that LNG import terminals will be idle more often.