Chinese energy companies have begun reselling purchased supplies of liquefied natural gas (LNG) to other consumers in Asia and even Europe. This is reported by Bloomberg with reference to traders familiar with the course of negotiations and specific transactions.
State-owned companies China National Offshore Oil Corporation (CNOOC), Sinopec and PetroChina are selling their gas surpluses, which have formed as a result of a slowdown in the Chinese economy amid lockdowns and fears of a global recession. The agency claims the companies are reselling gas from Australian and US LNG projects; several shipments were sold to Europe, which is currently suffering from an energy crisis amid reduced gas supplies from Russia.
Surpluses in the domestic market have accumulated as a result of severe lockdowns that have brought entire cities and businesses to a halt. The agency estimates that domestic gas consumption fell by 20% in 2022, freeing up these capacities for resale to third countries. Due to the reduction in gas supplies from Russia to Europe, the global gas market is under record pressure. The growth in demand from European consumers was also reflected in Asian markets, which are not accustomed to competing for LNG with Europe, where gas prices have reached record levels.
The decline in domestic consumption from China should “relax” world markets a bit and help consumers meet demand at affordable prices, the agency said. At the same time, Chinese companies are probably just trying to capitalize on the heated gas market and increased demand for LNG, as the Russian side claims to have increased gas supplies to China to multi-month highs. We are talking about gas supplies through the Power of Siberia pipeline. Gazprom has never disclosed the price of supplies for fear of criticism, however, given the commitment of the Russian company to long-term contracts, the price will be several times lower than market values . Thus, China can simply replace expensive LNG from Australia and the US with cheap Russian gas.