US expected to expand scope of LNG trade with China

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A berthed ship is filled with liquefied natural gas (LNG) at an LNG refueling station in Macun Port of Chengmai County, south China’s Hainan Province, Nov. 20, 2021. /Xinhua

A berthed ship is filled with liquefied natural gas (LNG) at an LNG refueling station in Macun Port of Chengmai County, south China’s Hainan Province, Nov. 20, 2021. /Xinhua

Editor’s note: Azhar Azam works in a private organization as a market and business analyst and writes on geopolitical issues and regional conflicts. The article reflects the views of the author and not necessarily those of CGTN.

The pandemic-induced closures and travel restrictions in 2020 have crippled the world, including the US economy. Proven reserves of crude oil and natural gas in the United States fell 4% to 473.3 trillion cubic feet, according to the United States Energy Information Administration (EIA) year-end report released January 13.

Liquid fuel production faced a critical shortage of available storage. The average annual price of liquefied natural gas (LNG) at the Henry Hub, the natural gas pricing point traded on the New York Mercantile Exchange, also rose from $2.56 per million British thermal units (MMBtu) in 2019. to $2.03/MMBtu in 2020. prices have forced many U.S. operators to lower their proven reserves estimates and to wind down new well development plans.

Even before COVID-19 entered our lexicon, demand for oil and gas was declining in part due to the global economic downturn linked to the Sino-US trade war. The compelling circumstances that followed in July 2020 gradually plunged US LNG exports to 96,200 million cubic feet (mcf). Nevertheless, the country’s exports rebounded in the last quarter of the year, setting new records in November and December with exports of 280,682 million cubic feet and 304,263 million cubic feet, respectively.

Other factors, such as colder than normal winter temperatures in major Asian markets, contributed to the rise in exports. Yet deliveries of 125,723 million cubic feet to Beijing, according to EIA data, in the fourth quarter of 2020 also played a significant role in the recovery of LNG exports from Washington. China had burst into view with a wave of purchases to become the third-largest buyer of US LNG by ship behind South Korea and Japan.

Gasoline prices are displayed at a gas station in New York, Oct. 13, 2021. /Xinhua

Gasoline prices are displayed at a gas station in New York, Oct. 13, 2021. /Xinhua

Not only has the annual volume of US LNG exports to China increased more than 31 times, but the annual increase in exports to Beijing has accounted for more than 36% of the total annual increase. The trend continued and U.S. LNG exports increased by 42%, or 2.8 billion cubic feet per day (bcf/d), to reach a median value of 9.6 bcf/d over the past six early months of 2021 on the back of increased global demand and rising LNG spot prices in Asia and Europe as well as exports of around 200 billion cubic feet to China over the same period.

The United States’ LNG export capacity has expanded significantly since February 2016, making the country the third-largest LNG exporter in 2019 behind Australia and Qatar. It will be the largest in the world once new LNG liquefaction units, called trains, at Sabine Pass and Calcasieu Pass in Louisiana come online by the end of 2022. By the end of this year, capacity Washington’s nominal and maximum LNG production would likely exceed Canberra and Doha.

But to reach and stay the course and capitalize on the full potential of its LNG sector, the United States still needs China, which dethroned Japan from a decades-old title to become the world’s largest buyer. super chilled fuel. Experts predicted this would happen as Beijing led the way by adopting and promoting several EIP (eco-industrial parks) standards and counted on a strong economic rebound to reverse the trend of pollution and CO2 emissions. The EIA acknowledged that Beijing’s import and production growth was driven by government policies to switch from coal to natural gas in a bid to reduce air contamination and meet emissions targets. .

China had already overtaken Japan to become the world’s largest importer of natural gas in 2018 with combined pipeline and LNG imports averaging 11.9 billion cubic feet per day, up from 10.9 billion cubic feet per day. for Tokyo. Citing data from the International Liquefied Natural Gas Importers Group, the EIA said China’s LNG import capacity had more than doubled from 5.8 billion cubic feet per day to 11.7 billion. cubic feet per day between 2013 and 2020. By 2024, Beijing’s LNG import capacity is expected to increase by 4 billion cubic feet. /D.

While the United States may not retain the crown of LNG exports by capacity after 2025, when the expansion of Qatar’s North Field would topple it to regain the lead, American operators are expected to develop new LNG plants to strengthen their leadership and take advantage of the growing Chinese demand for LNG. This is vitally important given that China was the biggest buyer of US LNG in the first 11 months of 2021, according to EIA export statistics.

Last year, Chinese companies reportedly signed contracts worth more than 10 million tonnes of LNG per year with US exporters Cheniere Energy and Venture Global, including two 20-year contracts for a total of 4 million tonnes of LNG per year. year. According to Reuters, they will also double the volume of Chinese imports from the United States. With analysts predicting LNG spot trading to see a two-fold increase in 2020 value to $20 billion by 2027, Beijing’s trade liberalization presents an opportunity for Washington to deepen the energy cooperation and expand its share in the world’s largest LNG market.

China and the United States are the largest consumers and producers of energy in the world. Disputes and disagreements between the two major world powers must be handled diplomatically, preventing them from upsetting the crucial trade and economic relationship. It is not in American interests to maintain tariffs or ban Chinese products such as solar panels. The White House must realize the importance of bilateral trade and must expand the scope of LNG trade to other areas that will bring even greater strategic benefits to the United States.

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