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China's increased gas imports from Russia could extinguish Australia’s LNG export rise

China's increased gas imports from Russia could extinguish Australia’s LNG export rise

Beijing, July 18 - Neftegaz.RU.
According to Chinese Global Times, the progress and functioning of Russia's Power of Siberia pipeline could be a bad omen for Australian LNG exports despite record volumes recorded in recent months.

Chinese CNPC and Gazprom agreed on certain details about how a trans-border section of the pipeline should be put into operation, a statement on the CNPC said. On the same day, a top Gazprom executive said 2,156 km of the Power of Siberia gas pipeline were already built, with 1,950 km already tested.

Within China, construction is under way to bring Russian gas south to Shanghai. Jin Lei, professor at the China University of Petroleum, pointed out that given a natural LNG cost disadvantage and Australia's strained ties with China, Australian LNG exports stand to lose from the upcoming era of Russian pipeline natural gas.

Australia has been China's largest source of imported LNG. In April, its shipments to China surged 61.3 % year-on-year, as demand in China rose and Australia itself expanded its LNG export capacity.

"Australian LNG shipments to China will face a very big challenge when the Russian pipelines begin to channel gas," Jin told the Global Times. LNG needs costly special-purpose vessels for transportation and the number of receiving facilities, which are also expensive, is limited in China, according to Jin.

"With this natural cost advantage over LNG, if the price of the Russia-China gas deal is reasonable, then pipeline gas will squeeze the LNG market," Jin said. In 2014, Russia and China signed a $400 billion deal on the supply of 38 billion cu m of gas over a period of 30 years.

China is the world's top importer of natural gas and 2nd-largest buyer of LNG after having surpassed South Korea in 2017. A total of 46.92 million tons of natural gas were imported in the 1st half of this year, up 11.6 % from 1 year earlier, data from the General Administration of Customs.

China's key sources for LNG are in Southeast Asia, Australia and Qatar. For pipeline gas, China has currently 2 arteries channeling gas from Turkmenistan and Myanmar to feed its natural gas demand.

"The world's major consumption market for LNG is limited. With 3 pipelines in place and functioning, China's growing demand for natural gas can be met," Jin said.

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