BOATLOADS

China is preparing to buy a lot more natural gas from the US

Obsession
Energy Shocks
Obsession
Energy Shocks

It looks like China will make another bet on US natural gas, building new gas terminals at ports in four provinces. The facilities will accommodate the country’s increasing reliance on foreign gas.

The CEO of Kunlun Energy said in its annual shareholders meeting (paywall) that the company is conducting feasibility studies to build import terminals in four provinces. Kunlun is a subsidiary of China’s state-owned oil and gas company China National Petroleum Corporation (CNPC).

Earlier this year, CNPC signed a 25-year contract (paywall) with Cheniere Energy, a US-based liquified natural-gas producer. It was the first ever long-term contract to export liquefied natural gas from the US to China.

The US wasn’t selling liquified natural gas to China in any significant amount before 2016, and just last year China became the third largest export market for US liquefied natural gas, making up about 15% of the total exports, after Mexico and South Korea, according to figures from the US Energy Information Administration.

But even then, the exports were timed to meet the surge in demand during China’s winter months last year. With Cheniere’s new long-term deal, exports are likely to increase even further.

China’s domestic production of natural gas can’t keep pace with the country’s needs. The nation’s effort to reduce air pollution and replace coal has led to a spike in natural gas use. Building new import terminals is an important step towards facilitating long-term energy-based trade partnerships. CNPC estimated (link in Chinese) that US exports of liquefied natural gas to China this year could be worth up to $6.7 billion dollars. For two governments already sparring on the international stage over trade imbalances, efforts like these—however small or incremental—are critical as they discuss the future of their trading relationships.

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