On his first day in office, President Donald Trump vowed he would establish US energy dominance over the globe. Seven months on, that goal is under threat as the world’s largest importer flexes its economic and geopolitical muscle.
This week, after years of pushing back against Russia’s ambitions for a massive new gas pipeline to significantly expand eastbound exports, China has brought Power of Siberia 2 a step closer to becoming reality. It appears to have agreed to expanded capacity on other routes, too. Days earlier, Beijing made another important concession at Washington’s expense, turning a blind eye to a US-sanctioned Arctic LNG cargo for the first time.
Much of the detail here is unclear. The pipeline agreement, described by Russia’s Gazprom PJSC as a binding deal, has not been confirmed by China, which has used broader language around energy agreements in its official pronouncements. So far only one liquefied natural gas shipment has arrived in Beihai port. Also, China is unlikely to have departed from its eagerness to keep a range of potential suppliers.
But the ties binding Russia to its most important consumer have undoubtedly tightened.
“The geopolitical message is significant,” said Michal Meidan, who leads China research at the Oxford Institute for Energy Studies. “Russia needs buyers for its gas and has long talked up the pivot east, this is a significant outlet for its gas. China is hedging against its exposure to US LNG and to US financial trading architecture.”
An apparent deal around Power of Siberia 2 is perhaps the splashiest outcome of Vladimir Putin’s four-day visit to China. The pipeline is vital to efforts to secure new buyers in Asia after flows to Europe — once Russia’s biggest customer — all but dried up after the invasion of Ukraine in 2022.
Add in the expansion of existing pipelines, also agreed in Beijing, and it is the equivalent of more than 40 million tons per year of LNG that China may no longer require — over half of the nation’s total imports of the super-chilled fuel last year, according to BloombergNEF.
While Gazprom, which will supply the gas through the Power of Siberia 2 pipeline, didn’t say when the link would come online, BNEF says that it is possible it could start after 2030.
“Given that China is the largest importer of LNG, this would turn the LNG market on its head,” Bernstein analysts including Neil Beveridge said in a note. “For LNG projects that are still being contemplated, this would be a big negative.”
Source: Stephen Stapczynski
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