Russia is boosting natural gas shipments to China as it curbs flows to Europe, which may offer some respite from the surge in energy costs.
The price of gas in Europe went up after Russia cut supplies. Ogan Kose, a managing director at Accenture, said that Gazprom is shipping record volumes to China and that this is helping to balance the market.
Kose said in an interview this week that Russian gas being supplied to China will make a difference. As a result of that, China will no longer want to import Liquefied Natural Gas.
European nations want to cut their dependence on Russian gas and are looking for more supplies of Liquefied Natural Gas. Producers are redirecting capacity toward Europe because the region is expected to remain a premium market.
Increasing flows of gas from Russia to China are set to replace higher priced gas in the Chinese market.
Russia's plans to build new links to China have been accelerated because of the war. Siberia's biggest fields, which feed Europe, will eventually be connected to China, giving Russia an alternative outlet for its vast resources.
Russian gas will be sold in Asia. There will always be someone else buying that gas.
China imports gas and oil.
The China Gas Quarterly was published by the National Development and Reform Commission.
China, which also imports gas via Central Asia, is buying more gas and less of it.
China has been absent from spot purchases of liquified natural gas so far this year and its appetite may remain low through September due to high prices and uncertainty about the economy.
Europe's prices are worried about how quickly China comes out of covids. Goldman Sachs Group Inc. said in a note last week that as Chinese economic activity recovers, it may start to compete with Europe for Liquefied Natural Gas cargo.
If Russia stopped gas flows to Europe, prices would go up five times the current level. Kose said that the average price in 2023 would be less than this year.
The risk of a global recession will reduce gas consumption by as much as 16% in the European Union next year. The European Union wants a 15% reduction in gas use through the winter, while the French utility says that clients are cutting gas use.
The combination of demand destruction in Europe and Asia and Russian gas finding new outlets will bring gas prices down. The high price environment is not sustainable in the long term if the winter is worse than in the past.
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