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Page added on September 18, 2018
US Gas Exports Hit by China Tariffs as Trade War Escalate
China plans to slap tariffs on U.S. natural gas exports as trade tensions escalate, a likely setback for the burgeoning energy relationship between the world’s two largest economies.
The Asian nation said in a statement Tuesday it would levy a 10 percent duty on liquefied natural gas starting Sept. 24, retaliation for a fresh round of tariffs announced the day before by the U.S.
While China’s levy is less than the 25 percent it proposed last month, the tariff still brings additional pressure to bear on the U.S. gas industry, which is competing with Russia, Australia and Qatar for market share in China, the world’s biggest buyer. Just last year, American officials were courting Chinese companies to invest in new export projects.
China’s move signals how much pain Presidents Xi Jinping and Donald Trump are willing to endure not to back down from a trade fight. Trump risks stifling the U.S. gas export industry, which is seeking about $130 billion to fund more than a dozen projects, while Xi threatens to raise the cost of his drive to eliminate smog by burning less coal.
“Chinese companies will have an aversion to investing in U.S. LNG projects in the short term” if tariffs are imposed, Saul Kavonic, Credit Suisse Group AG’s director of Asia energy research, said before China’s announcement. “Australia and Qatar’s LNG sectors will benefit from being seen as a lower-risk source of supply by customers in the world’s fastest growing LNG market, at least over the near term.”
Booming Demand
China’s push to use more natural gas is driving global demand growth, with LNG imports jumping 47 percent in the first seven months of the year. Though it’s the third-largest buyer of U.S. cargoes, American supply made up a little less than 6 percent of purchases over that period, according to Sanford C. Bernstein & Co. If U.S. companies can seize 20 percent of the market by 2030, it could lower the trade deficit with China by $50 billion, Bernstein estimates.
Higher oil prices and a surge in LNG demand have reignited interest in export ventures, with about 15 U.S. projects targeting final investment decision this year and next, the most of any nation, according to Bloomberg NEF. Projects have been seeking investments or off-take agreements from China, which earlier this year topped Japan as the world’s biggest gas importer.
On Monday, Cheniere Energy Inc., America’s first and biggest shipper of shale gas, struck a 15-year agreement to sell the fuel to commodities trader Vitol Group. The pact is Cheniere’s fifth this year. Venture Global LNG Inc., which is developing a terminal in Louisiana, has finalized four such contracts over that period.
To read more about China’s tariffs on $60 billion of U.S. goods, click here
Liquefied Natural Gas Ltd., which has yet to make a final investment decision of the $4.35 billion Magnolia LNG project in Louisiana, expects Chinese buyers will wait for uncertainty on tariffs to be removed before signing contracts, Chief Executive Officer Greg Vesey said Monday at an industry conference in Barcelona.
“It is hard to see any of these hopeful projects getting another Chinese buyer signed up for long-term volumes” if China slaps tariffs on U.S. gas, Trevor Sikorski, an analyst at Energy Aspects Ltd., said before Tuesday’s announcement. “Given China is a huge part of global LNG demand growth, that is a big headwind for these new projects.”
Exporting nations such as Australia and Qatar could benefit from the trade tensions, according to Xizhou Zhou, an analyst at IHS Markit.
“You have two important parties in the LNG market — one is a very important large buyer, one is an important large supplier — less likely to negotiate with each other,” he said by phone. “So Qataris, Australians will have less competition when it comes to the Chinese market for long-term contracts. ”
The vessel GasLog Greece, which left Cheniere’s liquefied natural gas export terminal in Louisiana on Aug. 15 en route to China, changed its destination mid-journey to South Korea. It was one of at least two U.S. LNG shipments heading for China during the past month. The other ship, Rioja Knutsen, arrived Sept. 3 at Tianjin.
9 Comments on "US Gas Exports Hit by China Tariffs as Trade War Escalate"
rockman on Tue, 18th Sep 2018 3:04 pm
According to the EIA China currently imports 14.6% of US LNG exports. Or 3.26% of all NG exports from the US NG industry. Or 0.36% of the total NG produced by the US NG industry.
I doubt the US NG industry is laying awake at night worrying about losing exports to China. BTW the US exports 36% more LNG to Mexico then China and 15X as much NG by pipeline. Mexico hitting US NG imports with big tariffs would be a much different story.
makati1 on Tue, 18th Sep 2018 8:02 pm
It fascinates me that the US keeps punching it’s banker, supplier of most of its necessities and its customer of many US exports, China. The Us is falling to its knees in collapse and still expects to be the power of the world. Delusions of grandeur or pure stupidity? Or both? LMAO
Anonymous on Tue, 18th Sep 2018 10:22 pm
The article was discussing the impact on LNG operators like Cheniere. (Not on gas E&P.)
China is a big part of the world LNG market and the major source of growth:
https://www.cnbc.com/2018/06/26/reuters-america-china-to-become-top-gas-importer-in-2019-boosted-by-lng-iea.html
Boney Joe on Tue, 18th Sep 2018 11:15 pm
The world will celebrate when the US empire does a crash and burn- good riddance to filthy rubbish.
Spoiled rotten yanks. They represent just 5% of the global population, yet consume 40% of the world’s resources. Just imagine the resource dividend for the world once the Cancer States of America and its chief propagandist, DDT are finished.
DDT, you are the worst possible Cancer ambassador. You’re doing a magnificent job creating enemies of the Cancer States, Your hero, Donald Dump, should award you a medal during his banana republic military parade.
makati1 on Tue, 18th Sep 2018 11:42 pm
“America cannot win a trade war right now. They are running “tremendous” (in Trump language) deficits, an unfathomably large debt, and rely on the printing of money and the largess of other countries to buy its debt in the form of US Treasuries. The government is almost entirely beholden to foreign entities for it to be able to function. This is no way to run a country. ”
http://aheadoftheherd.com/Newsletter/2018/The-beginning-of-the-end-of-the-dollar.pdf
“Think about this. China could pay for its entire Belt and Road initiative out of its USD account – which holds about a trillion dollars. Once that is done and dusted, why do they need US dollars to buy US goods and other commodities? They can get what they need from Russia, Iran, or whoever else the US doesn’t want to do business with, and the countries they sign up to One Belt One Road. Russia has virtually no US dollar reserves. They sold them all. Is this not an indication that the world is turning away from the US dollar and towards inter
-country currency transactions instead?” Nuff said.
Davy on Wed, 19th Sep 2018 4:32 am
“U.S.-China Trade Tussle Is Creating Winners in Southeast Asia”
https://tinyurl.com/y8ylxd7p
“No one wins from a trade war,” is a standard refrain among economists. Southeast Asian businesses are trying to prove that maxim wrong. The region is capitalizing on a rush of new orders and production moves as firms reconsider their business in the U.S. and China amid a deepening trade war. About one-third of more than 430 American companies in China have or are considering moving production sites abroad amid the tensions, according to survey results released Sept. 13 by AmCham China and AmCham Shanghai. Southeast Asia was their top destination.”
Boney Joe on Wed, 19th Sep 2018 6:10 am
DDT quotes from an article from an obscure source about US companies “considering moving production sites”.
Stop wasting space on stupid make believe stories in a pathetic attempt to justify the orange pumpkinhead’s trade wars. You are soooo predictable and what a fucking phony and fraud you are constantly.
makati1 on Wed, 19th Sep 2018 7:23 pm
The threat to move production sites is just that. A threat, originating in the US MSM propaganda mill. Most companies would not find it profitable to move their factory to another country. Certainly not because there is a temporary threat to their business caused by Trump’s bullshit. But then, most readers do not use commonsense or logic when they confront a propaganda article. Just ‘feelings’. Shades of “Atlas Shrugged”. lol
rockman on Thu, 20th Sep 2018 12:03 pm
A – “The article was discussing the impact on LNG operators like Cheniere.” No, it isn’t. In fact, it points out that Chenier, in particular, has a ready alternative for its LNG sales. As far as that goes Chenier and none of the other LNG exporters own NG production: they buy the NG they use to produce LNG from the US producers of NG. IOW the US NG industry.
The only specific negative impact they point out is for a potential builder of a new LNG plant:
‘Liquefied Natural Gas Ltd., which has yet to make a final investment decision of the $4.35 billion Magnolia LNG project in Louisiana, expects Chinese buyers will wait for uncertainty on tariffs to be removed before signing contracts”
Big picture, A, big picture. LOL