China, an “unexpected white knight” for Europe, is to its energy rescue. Europeans have built up gas reserves faster than expected thanks to liquefied natural gas donated by the Chinese.
China to Europe’s energy rescue. It is partly liquefied natural gas ceded by the Chinese that allows the Europeans to accumulate their reserves faster than expected.
the Asian Nikkei calls China an “unexpected white knight” for Europe, and you have to see how this Japanese economic newspaper, when it comes to Chinese power, rarely mentions it in favorable terms… irony.
It should be noted that the world’s largest buyer of liquefied natural gas (LNG) resells a substantial part of its cargoes to Europeans. This is recognized by several players in the Chinese market, industrialists or intermediaries, such as the oil company Sinopec, which alone sold at least 45 of its LNG shipments, which corresponds to more than 3 million tons.
If we relate it to all European imports in the 1st half, by a quick calculation, this could have covered not far from 6%.
A Shanghai merchant exhibits at Nikkei how comfortable the margins on these resales turn out to be, potentially up to $100 million per transaction. On the other hand, the London analyst Laura Page, specialized in monitoring this type of transaction at Kpler, believes that it is indeed “the great lifesaver for Europe”.
It is also explained by the significant decline in Chinese domestic demand, due to the successive lockdowns, in contrast to the increasingly higher world spot prices for LNG.
In addition, Beijing’s willingness to refer, as far as possible, to alternative sources, including coal, has been implemented. A public expert in Tokyo insists on a central directive in China that no longer favors, for the time being, considerations of “reducing the environmental footprint”.
Last March, Prime Minister Li Keqiang himself placed the nation’s energy security on a “strategic high” identical to that of food security.
China can afford this gesture to Europe all the better since LNG is not its main source of gas, but rather the means to fill the demand gap between its domestic production and its pipeline imports. Two Qatari academics, Abel Meza and Muammer Koç, demonstrated this in a March 2021 academic paper (Policy of Resources).
From Russia to China
In any case, without these Chinese LNG shipments, Europe probably would not have been able to reach its storage targets for November in advance, as the European Commissioner for Energy has just said.
Needless to say, Kadri Simon does not learn from this that it is a question of moving, at least partially, from one dependence on supplies from Russia to another, that of its great geopolitical partner, China, which when examining its customs statistics, would have redirected a large amount of Russian gas to Europe.
What does not enter into the speculation of an analysis is that the Chinese have been reinforcing their gas infrastructure for a long time. Also according to its public data, an annual endowment of 15,000 million dollars is dedicated to it, with fourteen LNG terminals being built throughout the country. Just yesterday, a state economic media reported instructions to build capacity in an eastern province traditionally focused on mining industries..
Construction of methane tankers
Another aspect of this global strategy consists of betting on the ships to transport this LNG, going on to challenge the supremacy of South Korea, whose world market share still exceeds 75%. Shanghai shipyards currently have orders for 17 LNG carriers, including four for Qatar Energy, one of the world’s leading producers.
The China Shipbuilding Industry Association (CANSI) expects increased demand to further drive up the price of LNG carriers, which its deputy secretary-general says will benefit both China’s shipyards and international carriers. from South Korea..
Although knowing, as an official Chinese newspaper points out based on an evaluation by the Norwegian consulting firm Rystad Energy, that the South Koreans have registered so many contracts that they no longer seem capable of accepting others before 2027. Therefore, an additional asset for China in this energy relationship with Europe.
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