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LChina is one of the winners of the energy price crisis caused by the Russian invasion of Ukraine. According to RTBF, formerly a major importer, is facing a significant slowdown in its domestic energy demand. In recent months, China has effectively resold its surplus liquefied natural gas (LNG) into economic markets. Europe is hungry for this resource today, whose prices are breaking records, coming from, among others, Russia.
Therefore, Russian gas that does not reach Europe via conventional gas pipelines returns to Europe via China at very high prices. “As Europe tries to break away from its energy dependence on Russia, it is creating a new pattern of dependence on both Russia and China, liberally financing their economies. » RTBF declares.
China, an energy lifeline
Amid an energy crisis, Europe is desperate to replenish its gas reserves in anticipation of winter. Facing the European Union, China is becoming an energy lifeline. Thanks to this, despite the shutdown of the Nord Stream 1 gas pipeline by Gazprom and the drop in Russian supplies, the goal of filling reserves to 80% by November has already been achieved. Russia’s share of gas imports to the EU fell from 40% to 9%, according to the Commission.
Miracle player in this clash, Beijing. China, a major importer, has never been a traditional gas exporter. Despite increased production, the country still needs to import 40% of its energy needs. In question, China’s economy has been operating at a slower pace in recent weeks following sanctions and production shutdowns linked to its “zero Covid” policy. »
China now wears the hat of the world’s largest LNG importer and sees a gas surplus. To be sold back into the markets, this offer meets the enormous shortage of Europe, which is willing to pay high prices to buy this precious resource before winter.
Resale costs two to three times more
Companies linked to the energy sector in China are often the winners: “They will resell their cargo to Europeans at two to three times the price on the spot market. In contrast to the futures market, the spot market makes it possible to buy cash for cargo that is physically present and already in transit,” RTPF points out.
Sinopec, China’s largest oil refiner, resold 45 full deliveries of LNG. According to RTBF estimates, China has sold a surplus of 4 million tonnes this year. By comparison, this amount represents 7% of natural gas imported by Europe in the first half of 2022.
China has been relatively discreet about these new deals. Recently, the Chinese daily Global Times published an article that openly acknowledges the mechanism. According to the newspaper, Chinese companies have increased their purchases from abroad by 10%, with the aim of reselling gas to European customers. However, the article does not mention the origin of the gas sold.
However, the answer to the specialized site oil.com is clear: China is “quietly” reselling this Russian gas to Europe. China’s LNG imports directly from Russia rose nearly 30% compared to 2021, while all other energy imports fell.
Therefore, Chinese operators buy LNG cargoes for resale to European countries, doubling or tripling the price of the transaction, according to oil.com. These companies thus profit, enjoying their role as intermediaries between these two large and interdependent players, who now refuse to communicate directly with each other, Europe and Russia.
How much time is left?
How long does this mechanism last? According to some experts, China will stop its export activities when its economic growth resumes. It will then stop selling LNG purchased from Russia, thus allowing its country to restart its industry. On the European side, after the Russian behavior, a major restructuring of the energy market is underway, accelerating the objective of reducing the consumption of fossil fuels. Logically, dependence on gas and oil should also be reduced in the coming years.
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