China is Locking Up Future Natural Gas Supplies

From Watts Up With That?

Essay by Eric Worrall

h/t resourceguy;

Next time you pay your gas bill, the bill might be higher because of China’s geopolitical games. Only the election of pro fossil fuel Western governments can fix this situation.

China’s Taking Control of LNG as Global Demand Booms

Stephen Stapczynski
Mon, February 20, 2023, 8:00 AM GMT+10

(Bloomberg) — A rush by China to sign new long-term liquefied natural gas deals promises to give the nation even more control over the global market at a time when competition for cargoes is booming.

Chinese companies are sealing the most LNG purchase agreements of any nation and increasingly are becoming the sector’s key import intermediary. The Chinese buyers are reselling many of the cargoes to the highest bidders in Europe and Asia, effectively taking charge over a hefty chunk of supply.

Firms based in China account for roughly 15% of all contracts that’ll begin delivering LNG supply through 2027, according to an analysis of BloombergNEF data. That trend is set to increase as the companies seek to lock in more long-term agreements, which will effectively give their traders control over the fuel for decades.

The Asian nation’s position in the market could be a double-edged sword: 

China can provide stability during periods of global shortages, but it could withhold supply and drive up prices if the needs at home must be met.

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Thanks to the mindless Western pursuit of Net Zero, China is increasingly in a position to impose a China tax on the entire world’s energy supply, or keep the gas for themselves if they so choose.

If the Chinese plan is to insert themselves into the middle, to make a profit by reselling the gas, their positioning makes sense. Man in the middle, cornering the market then forcing up prices is an old trick, which only works when there is a limited supply of something people can’t live without.

The obvious counter strategy to China making themselves the natural gas brokers of the world, and potentially making a fat profit from everyone’s gas bills by pushing up the price, is to break China’s monopoly, by flooding Western markets with increased domestic gas production.

But my suggested counter strategy would require a rational Western political response to energy shortages.

After observing the energy policy insanity of the last decade, people operating out of China appear to have reasonably concluded that Western politicians will not respond intelligently to their geopolitical games, and have gambled their fortunes on Net Zero obsessed Western politicians maintaining their regulatory hostility to the expansion of Western domestic gas production.

If Western commitment to Net Zero falters, and Western gas production rises, international gas prices could fall below the strike price of those big Chinese futures contracts. The billions of dollars of profits the Chinese gas pirates and their associates expect to make from cornering the market would flip over into big losses (the brown area of the graph at the top of the page).

I doubt it is just Chinese entrepreneurs who are involved in cornering the gas supply market.

Chinese entities might have purchased the gas futures contracts, but who owns those Chinese entities?

Who is on the boards of directors?

Who provided the money?

Who is receiving a share of the profits?

We have no way of knowing for sure who is involved. And it is worth noting, cornering the global gas market by purchasing gas futures is not against the law, so I am not accusing anyone of committing a crime. Lets just say I would not be surprised if some rich and influential Westerners are involved, in this entirely legal scheme, which I believe is aimed at ripping off ordinary Western energy consumers.