Page 9 - AsianOil Week 42 2021

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$2 per mmBtu ($55.32 per 1,000 cubic metres) Both the surge in global gas prices and Chi-
for LNG travelling from the US to China. na’s domestic power shortages have created a
Reuters cited consultancy Poten & Part- perfect storm that has left Chinese energy plan-
ners’ global head of business intelligence, Jason ners worried about gas shortages in the run-up
Feer, as saying Chinese companies were heavily to the winter heating season.
exposed to Brent-related pricing for LNG and
that US purchases offer some pricing diversity. Demand pressures
Cheniere had said in late September that it China’s gas purchases have soared this year
expected to announce “a number” of transac- amid a deepening power supply crunch that
tions, so other deals appear set to follow. has left around two-thirds of the country’s prov-
Both the news about the Venture Global and inces rationing electricity. The power shortfall
Cheniere deals as well as reports of ongoing sup- has been caused by a coal shortage, strict gov-
ply talks come as US-China LNG trade booms ernment restrictions on emissions and strong
after having briefly stopped in 2019-2020 owing domestic demand.
to their escalating trade war. China’s imports of piped gas and LNG
climbed 22.6% year on year in September to
Geopolitical thaw 10.62mn tonnes, according to General Admin-
Shipments of US LNG to China resumed istration of Customs (GAC) data published on
in March 2020 and hit a new record high of October 13. This was the highest level since Jan-
46.8bn cubic feet (1.3bn cubic metres) in April uary and reflects the country’s efforts to shore
2021, according to the US Energy Information up supplies ahead of peak winter demand. In the
Administration (EIA), which has published data first nine months of the year, the country’s gas
up to July so far. imports climbed 22.2% y/y to 89.85mn tonnes.
Indeed, previous talks between Sinopec and The power crunch has become so severe,
Cheniere over a long-term supply deal fell apart however, that observers have begun to suggest
as a result of the trade war and the collapse in that the central government will have to back-
LNG spot prices that happened around the same track on its clampdown on coal production and
time as the market was flooded with new supply. consumption.
Reports that Sinopec was in talks over a “Like other markets in Asia and Europe,
20-year deal to buy 2mn tpy from Cheniere China must perform a balancing act between
emerged in early 2019, and were followed in the immediate need to keep the lights on – via
early 2020 by news that the Chinese company more coal – and showing its commitment to
would review the terms of the potential deal increasingly ambitious decarbonisation tar-
owing to lower LNG prices. gets,” Wood Mackenzie’s Asia-Pacific vice chair,
The two companies were also waiting for a Gavin Thompson, said in a recent report. He
truce in the trade war, but by the time US LNG added: “But the short-term reality is that China
shipments to China resumed again, demand was and many others have little choice but to increase
being depressed by the coronavirus (COVID- coal consumption to meet power demand.”
19) pandemic and there was little appetite to China will likely move to ease its restrictions
ramp up purchases. on coal to avoid a repeat of media coverage
The LNG market has continued to be vol- focusing on freezing homes and schools during
atile, though, and booming demand is lead- the 2017-2018 winter. However, any short-term
ing to record-high LNG spot prices. Asian surge in coal demand will quickly translate into
spot prices have risen above $30 per mmBtu greater Chinese gas consumption given that the
($829.80 per 1,000 cubic metres) as buyers country’s commitment to achieving peak carbon
seek to secure short-term supplies ahead of emissions by 2030, with carbon neutrality to fol-
the winter heating season. low by 2060.™

Week 42 21•October•2021 www. NEWSBASE .com P9