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MARCH 2021

Russia’s Power Of Siberia Pipeline May Slow Down LNG Supply To China

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Russia's Power Of Siberia Pipeline May Slow Down LNG Supply To China

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The Power of Siberia pipeline would slow down liquefied natural gas (LNG) supplies to China, EADaily reported.

Experts believe that Australia will suffer more than others, which continues to increase exports to China, its shipments have increased by 61%, for example, in April 2019. The United States is not yet considering increasing its exports, because due to the trade war and the introduction of 25 percent duties, thus LNG (or as they like to call it “freedom gas”) imports from the United States fell to a minimum.

In 2018, China’s LNG imports reached a new record high.

China imported 53.7 million tons of LNG in 2018, a rise of almost 38% compared to 2017 when China surpassed South Korea as the world’s second largest LNG importer.

In December 2018 alone, Chinese LNG imports rose 25.9 percent to 6.29 million tons, logging a record for monthly LNG imports.

Currently, China is the second biggest LNG importer, after Japan, but it could likely overtake it by 2022.

By then, LNG imports in Japan are expected to decline 12%to 72.8 million tons per annum (mmtpa) compared to 2018, while China’s import volume rises 37.5% to 74.1 mmtpa.

In 2018, China began to actively switch from coal generation to gas and the consumption of blue fuel in the country grew by 19% to 280 billion cubic meters. Of these, 124 billion amounted to imports. It soared to 30 billion cubic meters and mainly due to LNG. Supplies of liquefied gas increased by 42% – to 74 billion cubic meters. The largest supplier was Australia. It provided 42% of LNG for China. This year, growth continued. But experts argue that this upwards tendency wouldn’t continue for long.

Russia's Power Of Siberia Pipeline May Slow Down LNG Supply To China

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Associate Professor Jin Lei, of China University of Petroleum-Beijing believes that the era of Russian pipeline gas is coming, which will stop the expansion of LNG.

“Australia (the largest supplier) will face serious difficulties when the Russian gas pipeline runs,” he told the Global Times. “The advantage of pipeline gas prices over LNG costs will squeeze the LNG market.”

In 2014, Russia and China signed a $400 billion deal on the supply of 38 billion cubic meters of natural gas over a period of 30 years.

China’s key sources for LNG are in Southeast Asia, Australia and Qatar.

For pipeline gas, China has currently two arteries channeling gas from Turkmenistan and Myanmar to feed its natural gas demand.

“The world’s major consumption market for LNG is limited. With three pipelines in place and functioning, China’s growing demand for natural gas can be met,” Jin said.

Last year, China received 47 billion cubic meters through a gas pipeline from Turkmenistan, Uzbekistan and Kazakhstan. Smaller volumes came from Myanmar.

Deliveries from Russia will almost double pipeline imports – by 38 billion cubic meters, but no immediately. The Power of Siberia will reach its designed capacity in 2025, and in 2022, for example, deliveries will amount to 16 billion cubic meters.

Nevertheless, the entry of Russian pipeline gas to China has already been taken into account at the International Energy Agency (IEA). Gas analyst Jean-Baptist Dubreul believes that by 2024, LNG imports to China will reach 109 billion cubic meters. Which is 38% growth over 5 years.

Another threat to LNG is the fourth gas pipeline from Turkmenistan, through which China will be able to receive another 25-30 billion cubic meters.

Although, as Aleksey Grivach, Deputy Director of the National Energy Security Fund (NESF), noted, there is no clarity regarding the pipeline in question.

“Three lines have already been built and loaded almost at a design capacity of 55 billion cubic meters per year. There is no clarity with the fourth (along the new route),” the expert said.

At the same time, the deputy director of the NESF believes that the main threat to LNG is not even in Russian pipeline gas.

“As for the “Power of Siberia”, to a large extent it will satisfy the demand in a new area of consumption – in northeastern China. The main threat to LNG and the overall pace of development of the gas market in China is the economic situation in the country and the trade war between Beijing and Washington,” said Aleksei Grivach.

Alexey Kalachev, an analyst at FINAM JSC, notes that the growth in consumption in China will be noticeable in any case and there will be enough room on the gas market for all exporters if they offer a competitive price.

“A more serious threat to gas exporters is China’s plans to increase its own production. Last year, China’s own gas production already grew to 161 billion cubic meters, and by the end of 2020 the goal is to reach 360 billion cubic meters,” Alexey Kalachev noted.

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