Chinese companies see the European energy crisis accelerating the energy transition, freeing up LNG for Asia.

Over the last 18 months, Chinese companies have been at the forefront of signing offtake deals for new LNG projects. Chinese LNG imports fell sharply in 2022 as prices rose, abruptly ending a longstanding upward trend, which saw the country temporarily become the world’s largest LNG importer.

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However, the energy crisis has not diminished the country’s thirst for the fuel. The crisis is seen as a temporary aberration, which is unlikely to affect the long-term development of the LNG industry. It could work well to China’s advantage.

According to Chinese delegates at the LNG2023 conference in Vancouver, the European energy crisis is accelerating the region’s energy transition, which, over the medium-term, will see European gas demand fall, freeing up LNG volumes for Asia. At the same time, it is encouraging new investment, in which China is playing a key role, strengthening future supply.

The Chinese delegates also expressed more uncertainty about how Chinese LNG demand will evolve than normally assumed by their western colleagues at the conference. Certainly, it is expected to rise. They see natural gas demand growing over the next 20 years. Domestic production will also rise, but it will not close the import gap.

However, the volume of LNG imports depends on a range of factors. First, major new gas pipelines are under discussion, they said, not just with Russia but with the states of Central Asia. Russian gas currently has nowhere to go, and China can expect to be a beneficiary, as it has been from the construction of the Power of Siberia gas pipeline.

Second, Chinese gas demand will be tempered by the speed of the country’s own clean energy development. China already has more wind, solar and hydro power than any other country in the world, as well as an active nuclear new-build programme. It is not the European or US energy transition on which the LNG market should keep an eye, but the dynamism of the Chinese transition, they suggest.

Third, the coal-to-gas switching policies which had such an impact on Chinese LNG imports pre-Covid have largely stopped, “the government is not pushing so hard, we still have coal,” one delegate said, who did not wish to be identified.

This feature was originally published in the LNG2023 Daily, produced by NGW during the LNG2023 conference in Vancouver July 10-13.