China’s tit-for-tat tariffs to depress US LNG, oil

Hard to be energy superpower when biggest consumer raises barriers: expert

China’s proposed tariffs on US liquefied natural gas (LNG) and crude oil exports has opened a new front in the trade war between the two countries and come at a time when the White House is trumpeting growing US energy export prowess.

China included LNG for the first time in its list of proposed tariffs on Friday.

That could cast a shadow over US President Donald Trump’s energy dominance ambitions. The administration has repeatedly said it is eager to expand fossil fuel supplies to global allies.

“The juxtaposition here is clear: it is hard to become an energy superpower when one of the biggest energy consumers in the world is raising barriers to consume that energy. It makes it very difficult,” said Michael Cohen, head of energy markets research at Barclays.

China had been restricting its imports of US LNG over the last two months, even before its formal inclusion on the list of potential tariffs.

It also became the largest buyer of US crude oil outside of Canada, but Kpler, which tracks worldwide oil shipments, reported that crude cargoes to China have nevertheless dropped off in recent months.

It comes at a time when the US has several large-scale LNG export facilities under construction and after Trump’s late 2017 trip to China that included executives from US LNG companies.

China, which purchased almost 14 percent of all US LNG shipped between February 2016 and May 2018, has taken delivery from just one vessel that left the US in June and none in July.

Meanwhile, according to Kpler, crude exports to China dropped to an estimated 226,000 barrels per day (bpd) in July, after reaching a record 445,000 bpd in March. China would likely hike purchases from Saudi Arabia, Russia, the United Arab Emirates and Iraq if the tariffs slowed US flows, said Neil Atkinson, head of the oil industry and markets division at the International Energy Agency.

There will be “others who will be offering barrels to China, so it could find itself able to replace lost volumes from the US,” Atkinson said.

“Cheniere continues to see China as an important growth market and LNG as a ‘win-win’ between the US and China,” said Eben Burnham-Snyder, a spokesman at Cheniere Energy Inc, which owns one of the two LNG export terminals currently operating in the US.

He added that they do not see tariffs as productive.

One project being developed is in Alaska, which would carry natural gas through a 1,287-kilometer pipeline across the state to a terminal that would convert it to LNG and take it to China.

The $43 billion project is still in development, and the Alaska Gasline Development Corp said on Friday that it believes the “current trade tensions between the US and China will be resolved well in advance of Alaskan LNG exports to China.”