China imposed a 10% tariff on LNG imports from the US, describing the measure as a response to the latest US tariffs on $200 billion of Chinese goods. The 10% tariff, which includes other products as well to affect $60 billion worth of trade, will go into effect Sept. 24, according to China’s ministry of commerce.
The tariffs were less than the 25% rate publicly contemplated by China in August 2018. Crude oil was excluded from the latest tariff announcement.
China’s LNG tariffs, given the size of its market, could hinder development of a second wave of US LNG export projects as final investment decisions approach by making LNG from other export regions more attractive. The International Energy Agency in its Gas 2018 annual report released in June predicted that China would become the world’s largest importer of natural gas in 2019, its overall demand expected to grow 60% between 2017 and 2023, reaching 376 billion cu m (bcm). IEA predicted China’s LNG imports would reach 93 bcm over the same period, from 51 bcm in 2017, an 82% rise.
PetroChina and Qatar last week announced a 22-year deal for supply of 3.4 million tonnes/year of LNG produced by Qatargas, starting immediately. “Such a large deal would have been under negotiation before the early August announcement that China planned to impose 25% tariffs on US LNG imports,” notes Alex Froley, ICIS LNG analyst. “Nevertheless, the contract will help underpin Qatar’s plan to expand production by 30% [to 100 million tpy] by 2023, while developers of new US LNG export projects must [hope] that the US-China trade war will cool soon to help them win more of the long-term deals they need to secure FIDs.”
Contact Christopher E. Smith at [email protected].
