China to Import More Oil and Gas from the U.S.
China’s natural gas imports, which currently account for more than 30 percent of domestic consumption, will continue to rise and boost trade with the U.S., according to energy consulting company ICIS China.
Gas is increasing in demand as the Chinese government moves to replace coal to combat air pollution and is set to attract more energy majors worldwide to meet the demand, said research director, Li Li. Record oil output in the U.S. and surging demand for gas in China have been a mainstay for global energy trade, she said. If the two countries can deepen cooperation in the fields of energy investment and trade, it will be a win-win for both sides, which play complementary roles as producers and exporters of oil and gas.
Wang Lu, an Asia-Pacific oil and gas analyst at Bloomberg Intelligence, echoed similar views and said solutions to reduce the U.S. deficit with China exist, reports China Daily. Though it can’t close the gap, increasing exports of LNG and oil to China could reduce the U.S. deficit with China.
According to Bloomberg Intelligence, the U.S. is China’s fifth-largest LNG supplier and exported 1.53 million metric tons of LNG to the country last year, a trade worth around $644 million. China is set to become the world’s largest importer of LNG in the next decade. Bloomberg New Energy Finance forecasts China’s imports growing to 82 million tons a year by 2030, but the country has long term contracts to supply just 42.5 million tons by then, leaving plenty of space for new purchases.
If China were to fill every drop of uncontracted LNG with U.S. gas, that would amount to about $20 billion a year in purchases by 2030. U.S. companies are aiming to boost exports, and PetroChina signed a 25-year purchase contract with Texas-based Cheniere Energy in February for 1.2 tons per annum of LNG. Private companies including Guanghui Energy and ENN Group have joined State-owned CNOOC, PetroChina and Sinopec in the LNG receiving terminals business, increasing channels for spot LNG imports.
Wang also estimated that China may buy more U.S. oil. Figures of Bloomberg Intelligence show U.S. crude oil exports to China were worth $4.4 billion in 2017, and the U.S. Energy Information Administration lifted the 2018 average U.S. crude oil production forecast to a record 10.7 million barrels a day. This may lead to more crude oil exports this year, she said. However, for now, for China, the biggest importer of oil in the world, U.S. crude is just a small part of its portfolio, with major suppliers like Saudi Arabia and Russia having the biggest shares.
There’s a lot of room left for China to increase imports of LPG, says Bloomberg Intelligence, fuel that’s used mainly for cooking, heating and transportation. Last year, China bought 3.56 million tons, or about 113,000 barrels a day, from the U.S., worth $1.86 billion. Only the UAE. supplied more, sending 6.49 million tons worth $3.19 billion.
Still, China’s imports from the U.S. were far lower than total estimated American LPG exports of about one million barrels a day in 2017. With shale output still booming and economic growth in the Asian nation showing little sign of slowing down, trade in products such as propane and butane can potentially be boosted. If that happens, other suppliers such as Saudi Arabia and Qatar may lose out on the prized Chinese market.
China could also increase its ethanol imports as the government expands its use in vehicles nationwide by 2020, according to Shanghai JC Intelligence. Purchases surged in the first quarter as buyers sought to secure supply ahead of extra tariffs and as expensive domestic corn made imports attractive. The U.S. accounted for about 86 percent of China’s ethanol imports in the first three months of this year, according to customs data.