According to a new report in Bloomberg, the Chinese government has instructed state-owned gas importers to halt all sales of LNG to foreign buyers as the government indicates it has fears over potential shortages this winter, and is looking to secure its own supplies.
According to sources with knowledge of the matter, the National Development and Reform Commission has told PetroChina, Sinopec, and CNOOC to cease sales of LNG to foreign buyers, and retain it for domestic use this winter. A source noted that despite the tight market in Europe, high shipping costs and the fact reserve inventories in Europe are reaching capacity has reduced the appeal of selling the fuel on to the EU.
China has been seeing falling domestic demand for gas recently, which had prompted China to resell its cheap LNG, usually bought at reduced prices under contracts negotiated when prices were lower, on the global market at today’s higher prices. Europe, Japan, and South Korea were all eager buyers.
As Russian gas supplies to Europe have dwindled, data shows imports to the EU have grown by 60% year over year, despite the much higher costs compared to Russian pipeline deliveries.
A growing number of forecasts predicting possible gas shortages this winter however, has likely caused Beijing to pull back on exports, given a pledge the government made to keep houses warm during the coming winter. President Xi gave a two-hour speech specifically on energy security on Sunday.
Bloomberg predicts the cut in exports by Beijing will definitely exacerbate Europe’s energy crisis this winter. The outlet said, “China holds large contracts to purchase LNG from exporters like the US, with the Asian nation’s traders diverting some of that supply to Europe this year amid lackluster demand at home.”