No More American LNG in China: Beijing Deals 'Serious Blow to US Energy Sector'

© REUTERS / Agencja Gazata/Cezary AszkielowiczThe LNG tanker "Clean Ocean" is pictured during the first US delivery of liquefied natural gas to LNG terminal in Swinoujscie, Poland June 8, 2017
The LNG tanker Clean Ocean is pictured during the first US delivery of liquefied natural gas to LNG terminal in Swinoujscie, Poland June 8, 2017 - Sputnik International
The developments come amid the ongoing trade spat between Beijing and Washington. As of September 24, US President Donald Trump imposed additional tariffs on $200 billion in Chinese goods, while China retaliated with levies on $60 billion in American products, including a 10-percent tariff on US liquefied natural gas (LNG).

Beijing has put an end to its purchase of US liquefied natural gas (LNG), Reuters cited several sources as saying late last week.

In his opinion piece for Sputnik, political analyst Dmitry Lekukh pointed out that the move will deal a "very serious blow to the US energy sector given that last year the Americans supplied about 3.6 million tons of LNG to the Chinese markets."

Lekukh recalled that in the past year, US LNG manufacturers have earned about one billion dollars per month from LNG exports to China.

READ MORE: Russian LNG is Likely to See Opportunity in China Amid Gas Shortage — Analysts

"Given the constant reduction of Chinese coal capacities and the growth of the country's gas needs, the US is now losing access to the most promising market in Southeast Asia," he noted, adding that China is expected to become the leader among gas importers by November of this year.

As for the US, it will most likely face the problem of overproduction of liquefied gas "in view of the forced 'political' withdrawal of American LNG from the thriving Chinese markets," according to Lekukh.

"For US energy structures, overproduction is very bad news in this case. Especially if you take into account the parallel capacity of the Russian Yamal region, compared to which American shale is not very competitive on Asian markets. Technically, Americans cannot be seen as Russia's competitors [in this field]. Moreover, they themselves are partly to buy Russian LNG," he added.

READ MORE: US Largest LNG Exporter Strikes Major Long-Term Contract With China

In this vein, Lekukh recalled that the US LNG manufacturers are also not very competitive as compared to "traditional suppliers from Qatar and other Gulf states which deliver the fuel to Southeast Asia."

It is safe to assume, therefore, that the European markets may become "the most suitable victim of the American shale expansion – something that will neither be prevented by Nord Stream nor Turkish Stream [gas pipeline projects]," he pointed out.

"Of course, no one doubts that both the Nord Stream and Turkish Stream pipelines will finally be built. But this does not mean at all that all of Europe will sit out on the consumption of cheap and high-quality Russian pipeline gas. After all, Russia's resource base is huge but far from unlimited," Lekukh emphasized.

READ MORE: Trump's Wishful Thinking: Why EU is Unlikely to Become 'Massive Buyer of US LNG'

Pipes are loaded onto a vessel in the northern German port of Mukran for transshipment to a storage yard - Sputnik International
Europe Uses US LNG Terminals as Backup for Pipeline Gas System - ENGIE
Therefore, he went on, Russia has started to think about the need for further "gas expansion" into the European markets amid reports about the planned consensus on limiting imports of Russian gas to Europe to the level of Nord Stream and Nord Stream 2, plus the "Turkish corridors" and "Soviet" routes.

"Given the fall in European [gas] production, this will be quite enough for American LNG to crawl into European markets. And such a situation on European routes will mean a sort of consensus among all relatively significant gas suppliers," Lekukh concluded.

The views and opinions expressed by Dmitry Lekukh are those of the analyst and do not necessarily reflect those of Sputnik.

To participate in the discussion
log in or register
Заголовок открываемого материала