Chinese gas needs to be a bigger concern for Europe than Russian supplies, which have been cut off

By: Simon Mattis

Europe’s gas supplies could be hit more by a larger-than-expected increase in demand for Chinese gas this year than by a complete shutdown of gas supplies from Russia, according to the International Energy Agency (IEA).

While Chinese demand is the “great unknown,” an upside scenario could see the country’s LNG imports rise by as much as 35 percent this year, if costs continue to fall and China’s economy expands rapidly, the International Energy Agency wrote in a quarterly report. . a report. This would dampen global competition for fuels and could push prices back to the “unsustainable” levels seen last summer.

China has abandoned tough virus restrictions that slowed its energy needs last year and made it easier for Europe to import record amounts of liquefied natural gas from around the world. Thanks to LNG purchases, combined with energy conservation measures and a mild winter, Europe has managed to survive the colder period of the year with less Russian gas flows, sending gas prices down more than 80 percent from their record highs. elevated.

Faster economic growth in China this year will increase fuel needs, but the big question is whether this will drive gas purchases to the same high levels as in previous years.

The prevailing uncertainty regarding Chinese demand is reflected by the International Energy Agency when it wrote that there is an uncertainty margin of 40 bcm between the lowest and highest estimates of the country’s net LNG imports this year.

At the higher end of the estimate, China’s import increase will exceed the previous peak from 2021. The margin of uncertainty corresponds to about 8 percent of Europe’s consumption this year.

“This range is greater than the uncertainty associated with the potential loss of all remaining gas flows to Europe from Russia,” the IEA writes.

Currently, China’s total gas consumption is expected to rebound by about 7% in 2023. Europe’s use fell the most in 2022, and the decline could be less severe this year. And IEA and EU officials stressed that self-discipline, and reining in consumption, remains crucial for Europe due to throttling supplies from Russia.