China’s appetite for natural gas has sparked deals with US fuel exporters, boosting energy trade between the world’s two largest economies, even as China’s relationship they become more and more complex.
The latest sales were announced Monday as Venture Global LNG, a company building a pair of liquefied natural gas export plants in Louisiana, signed two contracts to transport 3.5 million tons of the fuel. per year for China National Petroleum Company. Corporation, the largest LNG importer in the country.
The Cnooc transactions bring the bulk of contracts signed between US exporters and Chinese customers since October to seven. Some contracts span decades. According to the Energy Information Administration, China is poised to surpass Japan to become the world’s largest LNG buyer this year, while the US will overtake Australia and Qatar in LNG export capacity next year. according to the Energy Information Administration.
Tensions between Washington and Beijing have escalated over everything from China’s crackdown on the Uighurs in Xinjiang and the crackdown on the pro-democracy movement in Hong Kong to recent military activities. Taiwan. Meanwhile, China accuses the US of acting like a hegemon and trying to create a cold war between the great powers.
Gas sales, on the other hand, are another sign of the energy and climate relationship between the two powers. The two governments also defied expectations of reaching an agreement on tackling climate change at last month’s COP26 summit in Glasgow and have been negotiating the joint release of strategic oil reserves to lower prices. .
“The relationship between the US and China is at a very low point in many ways,” said Jason Bordoff, dean of the Columbia Climate School and a former energy official under President Barack Obama. “But energy and climate are a potential bright spot where, despite tensions and conflicts, more can be done together.”
Venture Global signed an agreement in November to send 4 million tons of LNG annually to Chinese state-owned oil giant Sinopec over 20 years, along with short-term agreements totaling 3.5 million tons with the company. Trade children Unipec. One of the new contracts with Cnooc also has a term of 20 years.
Mike Sabel, CEO of Venture Global, said China’s efforts to reduce carbon emissions by replacing coal with natural gas in power plants were behind the deals. The Sinopec agreement was made to send a good message ahead of the climate summit, he added.
“China is now moving faster with these new deals than the rest of Asia,” Sabel told the Financial Times. “But if we announce these agreements, the rest of the countries will… [respond] – and react – because otherwise China will gain an advantage.
“We are at this particular moment when the world really needs US LNG and US LNG is the fastest way to get online,” he added.
Cheniere Energy, the largest US LNG exporter, is betting on China to support growth. The Houston-based company recently reached agreements with buyers, including state-backed Sinochem, for a total of 3 million tons annually.
“We think Asia will be the growth engine for our industry in terms of LNG demand over the coming decades, and China is the largest part of that,” said Anatol Feygin, chief commercial officer of Cheniere. , told the FT in October.
Shutdown deals and gas flows are on the rise following a shutdown under the Trump administration, as China imposed tariffs on US gas in retaliation for imposing tariffs on its exports. . Chinese companies are looking for secure gas supplies as the electricity crisis takes a toll on the economy and gas prices rise globally.
According to trade data from Refinitiv, the US was the second largest supplier of LNG to China in the first nine months of this year. It is second only to Australia – another country whose relations with Beijing are deteriorating.
“China gets half of its LNG from Australia and the US – that’s not the case,” said Nikos Tsafos, head of energy and geopolitics at the Center for Strategic and International Studies, a Washington think tank. can please Beijing. “But they have to get to where the projects are, and that’s where it is now.”
Chinese President Xi Jinping told his US counterpart Joe Biden he wanted to “strengthen natural gas cooperation” at the leaders’ first meeting last month, according to a summary of the call from the Ministry of Foreign Affairs. Chinese diplomacy, a sign that Beijing sees as the country becoming the center of fuel supplies.
However, overseas gas sales in the US have become more politically sensitive after a recent rally pushed domestic prices above $6 per million British thermal units, the highest ever. since 2008.
Elizabeth Warren, an influential Democratic senator, sent a letter to the executives of 11 major natural gas producers, including ExxonMobil and BP, asking if the companies were considering cuts, suspend or terminate natural gas exports to prevent rising domestic emissions. help lower prices.
Some gas executives have been supportive, describing LNG exports as an opportunity for the US to help other countries phase out coal-fired power plants in favor of natural gas plants.
Bordoff of the Columbia Climate School said any steps to limit exports would undermine US confidence as a “reliable energy supplier”. He makes a parallel point with European countries’ concerns about their dependence on Russian supplies, which “have a political and geopolitical dimension to them”.
The booming international gas trade is also politically inconvenient for the Biden administration, as it spurs the economy’s shift away from fossil fuels. Although natural gas emits less carbon dioxide than coal when burned, it is still a major source of greenhouse gas emissions.
Tsafos at CSIS said it reflects the “cluttered reality of the energy transition” – that the world is still heavily dependent on fossil fuels and that the US is a major producer of oil and gas.
“The reality is, this makes both parties a bit uncomfortable,” he said.
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