China ax­ing U.S. LNG amid trade war, bring­ing Trump’s gas dream to naught

Tehran Times - - ENERGY -

The Trump ad­min­is­tra­tion has shot it­self in the foot by tight­en­ing the screws in the U.S.-China tar­iff war: Bei­jing is turn­ing its back on Amer­i­can liq­ue­fied nat­u­ral gas (LNG) in re­sponse to Wash­ing­ton’s third round of tar­iffs. The move is es­pe­cially painful for the U.S., as it had pro­jected to jump on the band­wagon of the boom­ing Asian gas mar­ket.

It ap­pears that China has found the U.S.’ sore spot: Bei­jing has dra­mat­i­cally di­min­ished the ac­qui­si­tion of Amer­i­can liq­ue­fied nat­u­ral gas (LNG) while U.S. crude oil ship­ments to the coun­try have com­pletely stopped in re­cent weeks, ac­cord­ing to China Mer­chants En­ergy Ship­ping Co (CMES).

The main rea­son be­hind China’s change of heart is Don­ald Trump’s trade war on the coun­try.

Start­ing from Septem­ber 24, U.S. Pres­i­dent Don­ald Trump im­posed tar­iffs on $200 bil­lion more in Chi­nese goods, mark­ing the third round of the Sino-Amer­i­can tar­iff spat. Bei­jing’s re­sponse wasn’t long in com­ing: China re­tal­i­ated with levies on $60 bil­lion in Amer­i­can goods, in­clud­ing a 10-per­cent tar­iff on the U.S. LNG.

In this Sept. 16, 2018, photo, Amer­i­can flags are dis­played to­gether with Chi­nese flags on top of a tr­ishaw in Bei­jing. The Amer­i­can Cham­ber of Com­merce in China says Bei­jing will dig its heels in af­ter U.S. tar­iff hikes and ap­pealed for a ne­go­ti­ated end to their trade bat­tle

Mean­while, U.S. LNG ex­ports to China have started de­clin­ing amid the trade spat: “Prior to the slow­down, China was on track to im­port 141.6 bil­lion cu­bic feet (bcf) of U.S. LNG in 2018, up from 103.4 bcf in 2017 and 17.2 bcf in 2016,” Reuters high­lighted.

Ac­cord­ing to Thom­son Reuters ves­sel track­ing and U.S. Depart­ment of En­ergy data, China is now on track to buy “less than 100 bcf of U.S. LNG in 2018.” Thus far, U.S. LNG sup­plies in 2018 have ac­counted for just 5 per­cent of to­tal Chi­nese LNG im­ports. For com­par­i­son’s sake, in 2017 China ac­quired about 15 per­cent of all U.S. LNG shipped in 2017.

China’s blow is es­pe­cially painful for the Trump ad­min­is­tra­tion, as it is in­creas­ingly pro­mot­ing U.S. LNG world­wide. In March 2018, Sec­re­tary of Com­merce Wil­bur Ross called upon Bei­jing to buy more Amer­i­can su­per-chilled fuel to cut the trade deficit gap with the U.S.

“China needs to im­port very, very large amounts of LNG and from their point it would be very log­i­cal to im­port more of it from us, if for no rea­son other than to di­ver­sify their sources of sup­ply,” Ross told Bloomberg TV on March 22.

The Trump ad­min­is­tra­tion has long sought to beef up the U.S. pres­ence in the grow­ing Chi­nese en­ergy mar­ket. Ac­cord­ing to the In­ter­na­tional En­ergy Agency (IEA), Chi­nese gas de­mand is set to grow by 60 per­cent from 2017 to 2023, reach­ing 376 bil­lion cu­bic me­ters (bcm). Hav­ing fo­cused on cut­ting CO2 emis­sions, China has al­ready out­paced Ja­pan as the largest nat­u­ral gas im­porter in the world.

Seek­ing to jump on the band­wagon of Asia’s boom­ing gas mar­ket, the U.S. has boosted its LNG in­dus­try. The U.S. En­ergy In­for­ma­tion Ad­min­is­tra­tion (EIA) fore­casted in De­cem­ber 2017 that the U.S. five ad­di­tional LNG projects were ex­pected to in­crease to­tal U.S. liq­ue­fac­tion ca­pac­ity to 9.6 bil­lion cu­bic feet a day (bcf/d) by the end of 2019, from 2.8 bil­lion bcf/d in Au­gust 2017.

In July 2018, Forbes fore­saw that China would need more U.S. LNG even though Bei­jing was in­clined to in­crease im­ports of Rus­sian gas through the Power of Siberia pipe­line: “Yes, Rus­sia will be a key sup­plier, but pipe­line sup­plies from Gazprom sim­ply won’t be enough to dim the bright fu­ture for U.S. LNG in China,” wrote Jude Cle­mente, a Forbes en­ergy con­trib­u­tor.

How­ever, the on­go­ing es­ca­la­tion of the U.S.-China trade war is likely to bring the bold Amer­i­can plan to naught. Wash­ing­ton is seem­ingly on track to lose one of the most promis­ing en­ergy niches. Be­sides, the lat­est de­vel­op­ments cast a shadow on the con­struc­tion of a Mag­no­lia LNG gas liq­ue­fac­tion plant in Louisiana with a ca­pac­ity of 8 mil­lion tons per year.

At the same time, the U.S. -China trade spat pro­vides new op­por­tu­ni­ties to Rus­sia and Per­sian Gulf coun­tries. Cur­rently, China is sub­sti­tut­ing U.S. LNG with the su­per-chilled fuel from Qatar, Saudi Ara­bia and the United Arab Emi­rates (UAE).

For its part, Gazprom’s Power of Siberia, which is ex­pected to be­come op­er­a­tional on De­cem­ber 20, 2019, is de­signed to de­liver 38 bil­lion cu­bic me­ters of Rus­sian gas to China an­nu­ally. And that is not all: Ac­cord­ing to Gazprom es­ti­mates, China’s pipe­line gas de­mand may soar up to 110 bcm by 2035. So, prob­a­bly, the Rus­sian gas gi­ant will need to lay an­other pipe to the coun­try.

Newspapers in English

Newspapers from Iran

© PressReader. All rights reserved.