U.S.-Chinese gas deals challenge tensions between world powers
China’s voracious appetite for natural gas has sparked a wave of deals with U.S. fuel exporters, boosting energy trade between the world’s two largest economies even as their relationship grows stronger. tense.
The latest sales were announced on Monday when Venture Global LNG, a company that is building a pair of liquefied natural gas export plants in Louisiana, announced it had entered into two contracts to ship 3.5 million tonnes of fuel per year to the state-owned China National Offshore Oil. Corporation, the largest importer of LNG in the country.
Cnooc’s agreements bring to seven the number of large contracts signed between American exporters and Chinese customers since October. Some of the contracts are to last for decades. China is set to overtake Japan as the world’s largest LNG buyer this year, analysts say, while the United States will overtake Australia and Qatar in LNG export capacity. next year, according to its Energy Information Administration.
Tensions between Washington and Beijing have escalated for everything from China’s persecution of Uyghurs in Xinjiang and the repression of the pro-democracy movement in Hong Kong, to its military activity near Taiwan. China, meanwhile, accused the United States of acting like a hegemon and of trying to create a cold war between the powers.
Gas sales, on the other hand, are another sign of the ties between the two powers on energy and climate issues. The two governments also defied expectations to reach a deal on tackling climate change at last month’s COP26 summit in Glasgow and negotiated a joint release of strategic oil stocks to cool prices.
“The US-China relationship in many ways is at a very low point,” said Jason Bordoff, dean of Columbia Climate School and former energy chief under President Barack Obama. “But energy and climate are a potential bright spot where there can be more cooperation despite tensions and conflicts.”
Venture Global had already signed agreements in November to send 4 million tonnes of LNG per year to Chinese oil and gas group Sinopec for 20 years, as well as shorter-term agreements totaling 3.5 million tonnes with its commercial subsidiary Unipec. . One of the new contracts with Cnooc is also for 20 years.
Mike Sabel, chief executive of Venture Global, said China’s efforts to cut carbon emissions by replacing coal with natural gas in power plants were behind the agreements. The Sinopec deal was programmed to deliver a good message ahead of the climate summit, he added.
“China is moving faster on these new deals than the rest of Asia,” Sabel told the Financial Times. “But as we announce these agreements, the rest of the countries [respond] – and react – because otherwise China will have an advantage. “
He added: “We are at this amazing time when the world really needs American LNG and American LNG is the fastest that can come online.”
Cheniere Energy, the largest US exporter of LNG, is betting on China to support growth. The Houston-based company recently made deals with buyers, including state-backed Sinochem, which total 3 million tonnes per year.
“We believe that Asia is the growth engine of our industry for LNG demand for decades to come, and China is the centerpiece,” Anatol Feygin, Cheniere’s commercial director, told the FT in October. .
Gas deals and flows are resuming after stagnating under the Trump administration, when China imposed tariffs on U.S. gas in retaliation for tariffs on its exports. Chinese companies are seeking secure gas supplies amid an economy-damaging power shortage and rising global gas prices.
The United States was China’s second-largest LNG supplier in the first nine months of this year, according to trade data compiled by Refinitiv. It was behind only Australia – another country whose relations with Beijing have deteriorated.
“China gets half of its LNG from Australia and the United States – that can’t make Beijing happy,” said Nikos Tsafos, head of energy and geopolitics at the Center for Strategic and International Studies, a Washington think tank. “But they have to go where the plans are, and that’s where they are right now.”
Chinese President Xi Jinping told his US counterpart Joe Biden that he wanted to “strengthen cooperation on natural gas” at the first leaders’ meeting last month, according to a summary of the Chinese Foreign Ministry’s appeal. , a sign that Beijing sees the country as central to its fuel supply.
Still, the sale of gas overseas has become more politically sensitive in the United States after a recent rally pushed domestic prices above $ 6million in U.K. thermal units, the highest since 2008.
Elizabeth Warren, an influential Democratic senator, sent a letter to the CEOs of 11 major natural gas producers, including ExxonMobil and BP, asking if the companies had “considered cutting, suspending or ending natural gas exports to help to facilitate the surge in domestic prices ”.
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Some gas executives have backed off, describing LNG exports as an opportunity for the United States to help other countries move away from coal-fired power plants in favor of natural gas-fired plants.
Bordoff of the Columbia Climate School said any measure to cut exports would undermine confidence in America as a “reliable energy supplier.” He drew a parallel with the concerns of European countries about their dependence on Russian supplies, which “have for them a political and geopolitical dimension”.
The boom in international gas trade is also politically embarrassing for the Biden administration, as it pushes the economy away from fossil fuels. Although natural gas emits less carbon dioxide than coal when burned, it remains a significant source of greenhouse gas emissions.
CSIS’s Tsafos said this reflected the “messy reality of the energy transition” – that the world remains heavily dependent on fossil fuels and that the United States is a major producer of oil and gas.
“The point is, it makes both sides a bit uncomfortable,” he said.
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