US LNG exports to China are declining

Meeting demand

The proposed import tax, which would make US exports of LNG uncompetitive, will have a limited impact on China's demand for natural gas, according to Huang Xiaoyong, president of the Graduate School of the Chinese Academy of Social Sciences, or CASS.

"Despite the rapid growth of US LNG exports to China in recent years, China is not dependent on this single source, as most LNG imports come from Qatar and Australia, which account for two-thirds of the country's LNG imports," he said.

"LNG imports from the US only accounted for 3.9 percent of the country's total last year, and it is not challenging to find alternatives for imports from the US as the global LNG market remains oversupplied."

Huang said the China-Russia natural gas pipeline, which will enter operation in 2019, will substantially increase imports of natural gas.

Platts forecast China's LNG demand will nearly double from the 2017 level to 68 million tons per year by 2023, and exceed the world's largest consumer, Japan, before 2030.

Consultancy SIA Energy predicted the country's LNG imports could surge by 70 percent over the next three years to 65 million tons in 2020. Last year, China imported a record 38.1 million tons, 46 percent more than the previous year, the company's data showed.

According to Na Min, a senior analyst for oil and gas at Bloomberg New Energy Finance, if China implements the tariff before winter, State-owned oil and gas companies are likely to use all measures possible to ensure a relatively stable gas market.

"On the demand side, they are likely to supply gas at increased peak season gas prices, while on the supply side, they will reduce flows to certain sectors by identifying users who can bear supply disruptions in extreme cases to ensure residential heating demand is fulfilled," she said.

"National oil companies will need to increase alternative supplies, including pipeline and LNG imports from other countries," Na said.