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as saying. “The additional amount went under- including 22.4mn tpy across 10 new import
ground as consumption growth flattened amid terminals.
the pandemic.” As its import capacity grows, China also
Now questions are being asked about what remains under pressure to ramp up purchases of
will happen to storage capacity and imports over US energy – including LNG – under the Phase
the remainder of this year – and in the immedi- 1 agreement struck between the two countries at
ate term. the start of this year in a bid to end the trade war
“There is a big question about whether between them.
demand will recover enough in September and Unsurprisingly, given the impact of COVID-
October to digest the almost-full gas storage 19 on demand, China is thus far falling short
while pipeline imports resume,” a Wood Mac- of the import targets set out in the agreement.
kenzie analyst, Miaoru Huang, was also reported Indeed, even before COVID-19 took hold, the
by Bloomberg as saying. “There will be no room target for energy purchases from the US was
for more injections to underground storage by considered so ambitious as to be unrealistic.
early September.” Since then, the pandemic has pushed the target
even further out of China’s reach.
What next Panjiva, a unit of S&P Global Market Intelli-
Compounding the storage crunch is the fact gence, estimated in August that Chinese imports
that China deferred some contracted supplies of US LNG during the first half of the year
of both pipeline gas and LNG during the peak totalled around $300mn. Also in August, Reu-
of its COVID-19 outbreak and lockdown. These ters estimated that China had bought only 5% of
volumes are set to come due over the winter, add- the targeted $25.3bn worth of energy products
ing to the storage glut and further discouraging from the US in the first six months of 2020.
additional purchases of LNG on the spot market. This shortfall, and worsening relations
“Chinese importers, which are usually under between the two countries more broadly, has
pressure to meet the surge of winter demand, led to concerns over the fate of the Phase 1 deal.
now may face pressure to sell in order to ease Conversely, if the US and China keep working
stockpiles,” an SIA Energy analyst, Liu Yue, an on restoring trade relations, this could lead to a
analyst with SIA Energy, was reported as telling further rise in Chinese imports of US LNG.
Bloomberg. The outlook for the remainder of 2020 and
The start-up of new regasification capacity the start of 2021 is complicated by considerable
is also boosting China’s LNG imports. Wood uncertainty over a number of areas – over the
Mackenzie noted this week that China leads the outcome of the US election, COVID-19 and
way in regasification capacity additions – unsur- LNG demand. The LNG industry will be hoping
prisingly, given that it is also the fastest-growing for a winter uptick in demand, but alongside the
demand region. The consultancy estimates that trends playing out in China, these hopes could
China accounts for over a third – or 52.6mn be undermined by mild winter weather, as they
tonnes per year – of total regasification capacity, were last year.™

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