While the United States remains engaged in a bitter trade war with China (the Biden administration, like the previous one, struggling to absorb an abysmal trade deficit), two industrial companies from the two countries in conflict have just officially announced a surprising energy partnership, in full COP26 on top of the market.
The Chinese oil giant Sinopec indeed announced on Thursday the signing of a large-scale contract with the low-cost American oil company Venture Global. The agreement will allow the Chinese to supply for a period of 20 years liquefied natural gas (LNG) extracted from rich North American gas basins.
In detail, the contract relates to the supply of 4 million tons of American LNG per year during these twenty years, “the longest signed between China and the United States in terms of liquefied natural gas”, welcomes Asia’s leading refiner in its press release.
Venture Global CEO Mike Sabel on this $ 30 billion supply contract to Sinopec talks about the largest long-term natural gas supply deal ever signed in American history.
Diplomatic clarification
This agreement is a surprising lightening in the stormy sky of Sino-American relations, usually punctuated by media clashes with pharaonic reciprocal punitive tariffs since the summer of 2018.
| Read: Snub for Trump, China is once again plunging the US trade balance
Because, of course, the Biden administration has in no way lifted the sanctions of the previous team, but in a context of energy crisis, it is visibly not opposed to the request of Beijing, which badly needs to increase its supply of raw materials to restart all its factories and meet global demand.
Insatiable China, the world’s largest importer of oil and gas
Indeed, the reopening of coal mines, the quota increases of those already in operation, not sufficient to supply its energy demand, the shortages and giant blackouts multiplying in recent weeks, the country, which already, in time normal, relies heavily on imports, is in a tense situation.
As a reminder, China only produces 27.4% (2020 figure) of its crude oil needs and 58.7% for natural gas. In fact, it is the world’s largest importer of both oil (19.8% of world imports) and natural gas (11.2% of the world total).
Soaring energy benefits Asia’s leading refiner
This is how we see a circular movement taking shape where global economic activity restarting, productive devices start to consume energy again, which leads to tensions between the struggling supply and the swelling demand, with the consequence of a sharp rise in the prices of all energies, in particular gas and oil.
This sharp rise in the cost of energy, but also the difficulty of finding it, weighs on the activity of companies, and in particular in China, disrupts the supply chains of all downstream factories, and ultimately poses a burden. risks to the growth not only of the Asian giant but also of other countries.
As for Sinopec, it is making a big splash in this global surge in energy prices: its quarterly results (published last week) are looking good, driven, he says, by strong demand for natural gas (+16 , 6% over one year) and by a policy of “cost control”.
(with AFP and Reuters)
