Europe inadvertently benefited from Chinese COVID restrictions, as reduced energy demand in China freed up global liquid natural gas (LNG) supplies to be resold to Europe, Bloomberg reports. China, the world’s largest importer of LNG, returned to lockdown throughout 2022, which helped curb domestic energy demand for the first time in history, resulting in Beijing selling excess LNG to Europe. Europe responded to the energy crisis by purchasing energy on the open market and was helped by the lack of competition from China.
Chinese LNG imports dropped by 20% in 2022, with the newly available gas helping Europe in the latter half of the year, primarily to build up its winter storage supplies. In total, China provided 6% of European LNG imports last year, primarily through resales, with 5.5 million tons of natural gas being resold at a profit.
“If not for lower Chinese LNG demand in 2022, the global gas market—and Europe’s energy security—would be in a far more perilous state,” Saul Kavonic, an energy analyst with Credit Suisse, said to Bloomberg.
Chinese energy demands are expected to return to normal in 2023, with China signing long-term purchase agreements to import LNG from Qatar. Along with Qatar, China also purchases LNG from Australia, Malaysia, and the United States.
Critics fear that China may use Europe’s new dependency on Chinese LNG supplies as potential leverage in the political realm. Similarly, Europe’s new gas deal with Azerbaijan last year has potentially influenced the bloc’s relative silence over the persecution of ethnic Armenians by the Azeri government.
Russia provided Europe with 17 million tonnes (or 18.7 tons) of LNG in 2022, with natural gas not included among Western sanctions. Russian gas exports to Europe were, however, impacted by the destruction of the Nord Stream pipelines in September 2022.
There are fears that Europe will face future gas shortages should sanctions be expanded to include Russian LNG, with Italy leading the way to establish alternative supply lines from North Africa.
Along with China, the United States also benefited from a 137% increase in LNG exports to Europe compared with 2021, with the U.S. becoming Europe’s primary supplier of LNG.
Experts remark that increased LNG imports helped stabilise European energy markets following the outbreak of war in Ukraine, with gas prices falling by the end of 2022 following an initial spike.
