Chinese energy companies have started reselling their stocks of liquefied natural gas (LNG) to other consumers throughout Asia and even Europe, Bloomberg writes, quoting traders with the knowledge of the negotiations progress and specific deals.
State-owned China National Offshore Oil Corporation (CNOOC), Sinopec, and PetroChina are disposing of their gas surplus which resulted from the slowdown of the Chinese economy against the backdrop of lockdowns and fears of a planetwide recession. As Bloomberg points out, the energy giants are reselling the product of Australian and American LNG manufacturers and have supplied a few shipments to Europe, which is battling an energy crisis brought about by a plunge in the Russian gas supply.
The domestic surplus accumulated primarily due to China's strict Covid Zero policy, which caused enterprises and entire cities to halt all activity. By Bloomberg’s estimates, China’s domestic gas consumption has slumped by 20% in 2022, freeing the capabilities for reselling to third countries. Russia pausing its shipments of natural gas to Europe has put the global gas market under unprecedented pressure. The growth of European consumers’ demand has also affected Asian markets, which are unaccustomed to competing for LNG with Europe, where gas prices are currently soaring.
The decrease in China’s domestic consumption should ease the tension on global markets and help meet consumers’ demand for reasonable prices, Bloomberg points out. Meanwhile, the Chinese companies are most likely looking for extra profit on the overheated gas market with its disproportionate demand for LNG because Russia asserts to have upped its gas supply to China to values unseen in months. China receives its gas through the Sila Sibiri (Power of Siberia) pipeline. While Gazprom has never disclosed the price it offers to China for fear of criticism, considering the Russian giant's proclivity toward long-term contracts, the price should be well below market values, allowing China to easily replace the costly Australian and American LNG with the cheaper Russian product.