???? China increases pressure on natural gas market

China is rapidly emerging as a dominant force in the global Liquefied Natural Gas (LNG) market, with Chinese buyers already accounting for 40% of all recently signed contracts for long-term LNG supply. In 2021, China overtook Japan as the world's largest LNG importer. However, due to the Covid zero policy, Chinese imports fell by about 18% to approximately 65 million tons in 2022. Despite this temporary setback, China's demand for natural gas in 2030 is projected to be at least 50% higher than in 2021.

To secure its supply, China has finalized long-term LNG purchase contracts worth almost 50 million tons per year between 2021 and 2022. This means that China has tripled the scale of its purchases through long-term contracts in just two years. For example, Sinopec, a Chinese energy group, signed a 27-year agreement with Qatar Energy to take 4 million tons of LNG per year, while another Chinese energy company, ENN Group, signed contracts with Energy Transfer and NextDecade to take a total of 4.7 million tons per year for the next 20 years.

For now, the United States is China's largest supplier of LNG, with 25 million tons per year, followed by Australia with 17 million tons per year. However, Beijing's main priority is to diversify the number of suppliers to ensure its energy security, which explains the new contracts being signed with the exporting powers in the Middle East. In addition to LNG transported in huge LNG tankers, China covers slightly more than half of its consumption with domestic production and significant pipeline supplies from Russia and Turkmenistan.

It's important to note that while there are rumors of a growing energy partnership between Russia and China, the truth is that the Asian giant will never become heavily dependent on a single source. China is expanding pipelines with Russia while also signing new LNG contracts with the United States, showing that it's unlikely to be an effective substitute for the demand that Russia has lost from Europe.

The Japan Institute of Energy Economics estimates that annual worldwide LNG demand will reach 488 million tons by 2030, an increase of about 40% from 2020. However, global supply is not increasing fast enough. In this context, China's effort to secure its long-term supply is commendable. The question is, is Europe doing the same? Foresight is needed, and Europe should introduce large tax credits for its energy companies to rush into the search for and exploitation of new deposits. This way, Europe would guarantee a much lower long-term energy cost, with consequent economic benefits for families and companies.