Additional American export capacity will reportedly take up to three years to come online
Energy companies from the EU and China are racing to secure shipments of liquified natural gas (LNG) from the US amid a potential supply shortage, the Financial Times reported on Tuesday.
In recent weeks, US LNG exporters have signed long-term contracts with a number of European firms as well as Chinese private energy company ENN. High demand is boosting investment in America’s LNG infrastructure, but it could take two to three years to bring additional supplies fully online, the FT wrote.
The International Energy Agency (IEA) stated in March that the amount of new LNG capacity reaching the global market this year would be “very low,” while energy consultancy S&P Global warned that it would be even less than the IEA’s estimate.
EU demand for LNG spiked last year following the start of the conflict in Ukraine and related sanctions against Russia, once the bloc’s main energy supplier. The EU switched from Russian pipeline gas to LNG shipments, mainly from the US and Qatar, although the bloc’s gas-buying frenzy has been criticized for taking supplies away from Asia.
Europe and China jointly accounted for nearly 40% of US LNG supply contracts agreed between 2021 and late June 2023, the FT reported, citing data from S&P Global. China signed large volumes of American LNG in 2021 and 2022, but demand has dropped in the current year. So far in 2023, European nations such as France, Spain and the UK have procured more gas from the US than China did, the FT noted.
Beijing began buying more gas from Russia after the country redirected its energy flows to Asia following Western sanctions. Last year, pipeline gas deliveries to China via the Power of Siberia pipeline jumped by 49% compared to 2021, while deliveries of LNG were up 35%, according to official figures. The two nations have also been actively replacing the US dollar with national currencies in bilateral settlements, in line with a wider push among developing nations to ditch the US currency and the euro in trade.
Other suppliers also accept the Chinese yuan for gas shipments. In May, China received a cargo of LNG from the UAE, with the trade deal being settled in yuan.
