Beijing has reportedly told state-owned natural gas importers to halt resales of cargoes to buyers in Europe and Asia, to make sure China has enough supply for domestic needs this winter.
The National Development and Reform Commission has spoken to Chinese energy giants PetroChina, Sinopec and CNOOC to ask them to stop the shipments of liquefied natural gas, Bloomberg reported Monday, citing people with knowledge of the matter.
An economic slowdown in China after Beijing imposed a strict zero-COVID policy dampened local demand for gas, leaving its importers with a surplus of natural gas that they resold to Europe and elsewhere.
They threw a lifeline to Europe amid its energy crisis by reselling unneeded LNG purchased from Russia. In August, an estimated more than 4 million tons of Chinese LNG was resold — or roughly 7% of Europe’s imports in the first half of the year — according to a Nikkei report.
Since the Ukraine invasion, China has been snapping up Russian fuel on the cheap, after sanctions and boycotts hit the Western market. At one point, China managed to get a 50% discount on LNG supply from Russia’s Sakhalin 2 export plant.
But with European gas inventories quickly filling up and shipping costs at record highs, the appeal of the LNG resales dimmed, per Bloomberg.
Another potential trigger for the move were forecasts for a small deficit in China’s gas supply, the report said, as the country looks to avert its own potential energy crunch during winter’s cold months.
Countries like Germany are on track to hit their winter gas inventory targets, after appealing for consumers to cut usage and scrambling to secure alternative supplies to those cut off by Russia.
The prospect of a European energy crunch sent regional gas prices soaring to historic highs above 346 euros ($336) per megawatt hour in August, as Moscow responded to Western sanctions over its war on Ukraine. Prices have since dropped more than 50%, and Dutch TTF futures on the ICE exchange were trading lower at around 136 euros per megawatt hour Monday.
The commission did not immediately respond to Insider’s request for comment.
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