China suspends European LNG sales amid gas scarcity
In order to ensure that China has enough natural gas supply for domestic requirements this winter, Beijing is said to have instructed state-owned natural gas importers to stop reselling cargoes to purchasers in Europe and Asia.
According to persons with knowledge of the situation, Bloomberg reported that the National Development and Reform Commission has requested that the shipments of liquefied natural gas stop from PetroChina, Sinopec, and CNOOC, three of the largest energy companies in China.
China’s economy slowed down as Beijing implemented a rigorous zero-COVID policy, which reduced local gas use. As a result, its importers had an excess of natural gas that they resold to Europe and other countries.
By reselling surplus LNG they had obtained from Russia, they provided a lifeline to Europe during the current energy crisis. More than 4 million tons of Chinese LNG, or around 7% of Europe’s imports in the first half of the year, were reportedly resold in August, according to a Nikkei report.
Since the invasion of Ukraine, China has been buying cheap Russian fuel after sanctions and boycotts impacted the market in the West. China once succeeded in negotiating a 50% discount on LNG imports from Russia’s Sakhalin 2 export facility.
The appeal of the LNG resales, however, diminished as European gas stockpiles swiftly filled up and shipping costs reached record highs, according to Bloomberg.
Forecasts for a minor shortage in China’s gas supply, the article added, as the nation attempts to prevent its own potential energy shortage during the chilly months of winter, were another probable catalyst for the action.
As Moscow reacted to Western sanctions over its war in Ukraine, the threat of a European energy shortage sent regional gas prices skyrocketing to historic highs above 346 euros ($336) per megawatt hour in August.
Prices have since fallen by more than 50%, and on Monday, Dutch TTF futures were trading at a lower price of about 136 euros per kilowatt hour on the ICE platform. Insider’s request for comment from the Chinese commission did not immediately receive a response.
