Global Courant
BEIJING — China is on a gas shopping spree, and officials are pleased that importers are continuing to make deals even after a global energy crisis has eased.
According to those who have met with policymakers, the government continues to support state buyers’ efforts to sign long-term contracts, and even invest in export facilities, to bolster mid-century energy security.
The country is on track to become the world’s largest importer of liquefied natural gas by 2023. And for the third straight year, Chinese companies agree to buy more of it over the long term than any other country, according to data compiled by Bloomberg news.
China looks far into the future to avoid a repeat of energy shortages while fueling economic growth. Long-term LNG contracts are attractive because deliveries are promised at a relatively stable price compared to the spot market, where gas rose to a record high after the Russian invasion of Ukraine.
“Energy security has always been a priority for China,” said Mr. Toby Copson, Global Head of Trading and Advisory at Trident LNG in Shanghai. “Having enough supply in their portfolio helps them manage future volatility. I expected more.”
The deal-making efforts will help support global export projects, strengthening the role of marine fuel in the energy mix. And as suppliers try to win over Chinese importers, Beijing’s influence in the market will grow.
China began pushing for long-term contracts in 2021 after relations with the United States improved. While imports fell in 2022, due in part to weaker demand amid Covid restrictions, Chinese buyers renewed the drive after the invasion of Ukraine cut off the gas pipeline to Europe.
The resulting high prices and global competition for the supercooled fuel quickly taught the need for stable supplies. Part of China’s pursuit of energy security is to diversify imports between different countries as a buffer against further geopolitical disruptions.
Several other importers, including India, are also looking to close more deals to avoid future shortages and reduce reliance on spot supplies, but China is closing contracts at a much faster pace. According to calculations by Bloomberg, 33 percent of long-term LNG volumes signed so far by 2023 have gone to China.
Last month, state-owned China National Petroleum signed a 27-year deal with Qatar, taking a stake in the exporter’s massive expansion project, while ENN Energy Holdings signed a decades-long contract with US developer Cheniere Energy. Deliveries of both contracts are scheduled to begin as early as 2026.
More deals are on the horizon as negotiations stretch across boardrooms from Singapore to Houston. State giants including Cnooc and Sinopec are in talks with the US, while smaller companies like Zhejiang Provincial Energy Group and Beijing Gas Group are also looking for deals, traders said.
Qatar is in talks with several Chinese buyers for sales contracts that could last more than 20 years, the traders said.
The deals will help fuel the roughly 12 new import terminals that will begin construction in China’s coastal cities this decade. According to Norwegian consultant Rystad Energy, the country’s LNG imports could reach as much as 138 million tonnes by 2033, about double the current level.
“Currently, more than half of China’s LNG demand from 2030 to 2050 remains uncontracted,” said Rystad analyst Xi Nan.
The government is not forcing companies to make deals and traders will only sign deals with attractive prices, the traders said. Chinese buyers are also using the new LNG contracts to expand portfolios and unlock lucrative trading opportunities.
