Advertisement
Advertisement
China-Russia relations
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
The volume of Russian LNG exports to China rose by 28.5 per cent in the first eight months year on year.

China’s Russian gas imports jump in first 8 months, while LNG exports hit record levels amid supply diversions

  • China’s natural gas imports from Russia via pipeline almost tripled in the first eight months to US$2.39 billion
  • China exported US$448 million worth of LNG to Europe, Japan, South Korea and Thailand over the same period

China’s imports of Russian gas surged in the first eight months of the year, while its LNG exports hit record levels amid reports Chinese energy companies have stepped up diversions to take advantage of high international spot prices.

Russia and Qatar were the only major suppliers to increase liquefied natural gas (LNG) exports to China in the first eight months of the year, customs data showed.

The volume from Russia, which has jumped from China’s sixth largest gas supplier to the fourth in the past year, rose by 28.5 per cent year on year. The volume from No 2 supplier Qatar increased by 66.7 per cent over the same period.

Chinese customs data showed the value of natural gas coming from Russia via pipeline almost tripled in the first eight months to US$2.39 billion. The August value increased by 26.5 per cent compared with the previous month.

01:50

China scales back emissions target with half of new electricity use to come from renewables by 2025

China scales back emissions target with half of new electricity use to come from renewables by 2025

China also exported a record US$164 million worth of LNG to Europe – including Spain, France and Malta – and another US$284 million worth to Japan, South Korea and Thailand in the first eight months of 2022. In contrast, Chinese exports were worth US$7 million last year.

China’s gas exports this year have been shipped primarily from Shanghai, Hainan and Guangdong, home to large LNG terminals that receive cargo from Malaysia and Australia under long-term contracts, and are also suited to re-exports. The two countries are among the top three LNG suppliers to China in 2022.

Chinese energy companies have been reselling excess LNG to the international market to take advantage of the price difference between long-term contracts and elevated spot price following the Ukraine war.

Domestic demand for natural gas in China has also slumped as the economy has slowed and the government’s zero-Covid policy has disrupted production.

China’s shrinking factory activity spells trouble for migrant workers

Dongguan Jovo, a privately-owned LNG terminal in southern Guangdong province, resold LNG cargo to Italy in the first quarter, according to the Shanghai Petroleum and Natural Gas Exchange, citing the company’s communications with investors.

Chinese state-owned energy firms such as Sinopec have also been offloading excess LNG back into the international market this year, Bloomberg has reported.

The average LNG export price from June to August was almost two times that of the import price over the same period, according to South China Morning Post Calculations based on customs data.

While reselling contracted energy to the spot market is normal in commodities markets, it has not always been the case for China, which surpassed Japan to become the world’s largest importer of LNG last year, said Michal Meidan, director of the China Energy Programme at the Oxford Institute for Energy Studies.

Chinese imports have historically been driven by domestic demand, she said.

The question I think for a lot of buyers and sellers is, is this a short-term issue?
Michal Meidan

The trend pointed to weak gas demand in China and a shift to more of a “trading mentality” in the gas market, which has traditionally been employed by Chinese oil traders, Meidan said.

“The question I think for a lot of buyers and sellers is, is this a short-term issue? Because a lot of companies have been carrying up their gas portfolios or their gas supplies and thinking of China as a very big demand market. But if that’s structurally changing, then that obviously opens a lot of questions,” she said.

China imports more than half of the natural gas it consumes, with around two-thirds in the form of LNG. It imported 71.05 million tonnes of natural gas from January to August, marking a 10.2 per cent year-on-year decline, according to the National Bureau of Statistics.

With Beijing’s zero-Covid policy expected to continue weighing on economic activity, China’s demand for LNG imports is forecast to decline by around 20 per cent in 2022 compared to last year, Jeffrey Moore, LNG analyst at S&P Global Commodity Insights, said in July.

02:54

China’s delicate position on Russia-Ukraine crisis and its opposition to Western sanctions

China’s delicate position on Russia-Ukraine crisis and its opposition to Western sanctions

Chinese buyers have essentially stopped buying LNG on the spot market this year as a result of weak demand and soaring prices, Moore said.

But they signed a record 22.7 million tonnes of long-term contracts last year, up 516 per cent year on year, with some starting delivery in 2022, according to an April note from S&P Global, citing state-owned oil and gas company China National Petroleum Corporation’s Economics & Technology Research Institute.

Some of the LNG being resold by Chinese customs may not even be reflected in customs data. Meidan said some cargoes could be directly reoriented from the source, rather than being unloaded and re-exported from the mainland.

“Some of [the long-term contacts], the payment is on arrival, and some are at the source, which would impact their ability to redirect cargoes directly from the origin, or having to take them into China and then resell them,” she said.

Limited storage capacity at LNG terminals along China’s coast would also restrict the amount of re-exports, she added.

While China stopped releasing data on pipeline gas imports in January, pipeline gas imports are estimated to be about 30.41 million tonnes in the first eight months of the year, up 10.6 per cent year on year, according to the Post’s calculations.

China’s LNG imports – which are by ship – were 40.64 million tonnes.

Experts said the increase in pipeline imports came mainly from a surge in supply from Russia.

In the first half of the year, Russian gas exports to China via pipeline grew 63.4 per cent from the same period a year earlier, said Russian gas giant Gazprom.

Earlier this month, Russia announced its gas supply to China will be settled half in yuan and half in roubles.
10