Russia has managed to gain significant market share in the Far East in an attempt to balance a loss in trade in Europe. China was a driver of Far Eastern demand growth for Russian gas even as the country’s zero-COVID policy – which has resulted in a drop in overall Chinese energy demand due to intermittent lockdowns – persists. Notably, Yamal LNG exports to China benefitted from the Northern Sea Route during summer.
China ramped up its imports of liquefied natural gas from Russia to record levels last month despite a decline in overall LNG imports, our data show.
Russia’s LNG exports to China from both Yamal LNG and Sakhalin-2 LNG increased by 0.30mmt (45pct) month-on-month and were up by 0.25mmt (35pct) year-on-year in September.
Although pro rata October shipments were still trailing their 2021 counterparts by roughly two cargoes or 0.18mmt (32pct) at the time of writing, for the year to date they were up by 0.57mmt (16pct).
Chinese LNG demand has overall been consistently weaker in 2022 compared to 2021 due to the country’s ongoing zero-COVID policy and high spot prices.
Our data show China’s LNG demand was down by 22pct year-on-year at the time of writing.
Liang Wannian, Head of the National Health Commission’s expert group on epidemic control, reiterated in mid-October the central government would maintain that policy, or ‘dynamic clearing’, until further notice.
But cheaper supply
However, China has also been taking advantage of discounted deliveries of Russian energy, comprising LNG, oil and coal, Chinese customs data suggest.
Unfortunately, as we reported earlier this year, China no longer discloses import volumes of pipeline gas but flows through the Power of Siberia trunkline are likely to have seen an increase.
Expedited Yamal flows
Exports from Yamal LNG to China rose with the onset of summer, which allowed the use of the Northern Sea Route and cut vessels’ journey times by more than half compared to routes through Suez or around the Cape.
China key destination for Russian gas
China has thus become one of Russia’s key energy buyers in the Far East following the Russian invasion of Ukraine.
Sanctions imposed by the European Union encompass a ban on coal imports since August while an embargo on seaborne imports of Russian crude oil is due to come into effect at the beginning of December.
A stop to EU imports of Russian refined oil products is set to being in February next year.
Whilst there has not been an EU-mandated stop to imports of Russian LNG, European offtakes of that supply have nonetheless suffered this year, our data show.
Imports were down by 2.67mmt for the year to September at the time of writing.
Russian LNG growth
Russian LNG flows, however, have yet to be negatively impacted on an annual basis.
Our data indicated the country had already increased total LNG shipments by 2.98mmt (13pct) in the year to September at the time of writing.
Growth in exports mainly to China, but also to South Korea, Taiwan and Thailand, was a material factor in facilitating rising Russian LNG exports.