China’s reduced LNG appetite eased Europe gas crisis: Kemp
LONDON, Feb 14 (Reuters) - China’s imports of liquefied natural gas (LNG) slumped in 2022 as the country ramped up domestic production and pipeline imports, while epidemic control lockdowns suppressed industrial consumption.
The result was to make more gas available to importers in Europe, especially during the summer months, averting an even more severe spike in prices following Russia’s invasion of Ukraine.
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China’s LNG imports fell by 16.3 million tonnes or 20% in 2022, according to statistics from the General Administration of Customs.
The slump was a remarkable turnaround after imports had increased at a compound rate of 26% per year for the previous six years.
If China’s imports had continued increasing at the previous rate, they would have approached 100 million tonnes instead of the 64 million tonnes recorded.
But LNG imports were lower in every month of 2022 compared with the corresponding month the year earlier, confirming an unprecedented slowdown.
Some LNG was replaced by increased pipeline imports, mostly from Central Asia, which were 4 million tonnes higher in 2022 compared with 2021.
Even more LNG was replaced by domestic production, mostly from the Tarim, Ordos and Sichuan basins, which increased by roughly 9 million tonnes last year.
But the largest share of LNG displacement seems to have come from reduced growth in domestic consumption as a result of pandemic lockdowns and the disruption of industry.
Saving Europe
China’s reduced LNG imports proved just as important as Europe’s gas conservation measures and mild winter in coping with the disruption to gas supplies following Russia’s invasion of Ukraine.
China accounted for 21% of global LNG imports in 2021 and the share would have increased further if imports had continued growing on the previous trend.
Instead, reduced imports represented a “saving” of roughly 4% of the global LNG supply and 6% or more compared with the pre-2022 trend.
China’s slower importing allowed Europe to refill its storage earlier, faster and for longer than normal ahead of winter 2022/23.
Germany’s rush to fill its storage at any price helped to drive Europe’s gas prices to record levels during July and August 2022.
But prices would likely have risen even higher and remained elevated if China’s reduced buying had not created some slack in the global market.
China’s LNG imports are unlikely to remain similarly subdued in 2023 after the decision to end COVID-19 restrictions and the rebound of industrial production.
Europe is likely to finish winter 2022/23 with a near-record volume of gas in storage reducing its refill requirement this year.
But Europe’s LNG buyers are likely to face stiffer competition for cargoes from China, especially during winter 2023/24, when Europe and China are likely to be topping up inventories at the same time.