The U.S. Department of Energy approved the annual sale of 4 million tons of liquefied natural gas (LNG) for 20 years to the Chinese Communist Party’s oil giant Sinopec, made by Venture Global in Plaquemines, Louisiana.
In the midst of the energy crisis facing the Chinese Communist Party (CCP), it seeks to cover the deficit by doubling the amount of gas it already imports from U.S. suppliers, according to Reuters on Oct. 20.
Since early September, the CCP has faced an energy crisis that has caused coal and gas prices to soar to unprecedented levels. The shortfall led to widespread blackouts that hurt China’s economic engines.
The severe shortages also caused the CCP to implement large-scale power cuts in factories and homes. In addition, the closure of textile, steel and other factories and the drop in production caused a domino effect that disrupted global supply chains.
To alleviate the need, around 1 million tons of Australian coal, which was in storage because of the embargo on its use following friction between the two systems, was brought into use.
This embargo contributed to the country’s energy deficit, yet the CCP has yet to restart imports from what was its second-largest supplier after Indonesia.
“Without resuming Australian coal imports, the supply shortage will be here to stay for some time, as it takes time to boost domestic production after nearly five years of output curbs,” said a Beijing-based trader.
He added: “I am not optimistic. The shortage will last at least through the fourth quarter and possibly till after February or March, when the heating season ends.”
Separately, Chinese authorities ordered nearly 70 coal mines in Inner Mongolia to increase output by about 100 million tons, or 10%, to boost production capacity and prioritize coal supply to power plants in northeastern provinces, including Liaoning.
In this regard, analysts at Nomura Holdings predict that the Chinese economy will contract this quarter due to energy shortages. As a result, growth forecasts for the third and fourth quarters of the year have been downgraded to 4.7% and 3%, respectively, from the previous 5.1% and 4% estimates.
The full-year growth forecast has also been cut from 8.2% to 7.7%. In addition, Goldman Sachs has revised down its third-quarter growth forecast for China to flat from 1.3% in the previous quarter.
In the global context, the energy deficit is equally worrisome. In Europe, gas is essential for heating and industrial manufacturing, and its price has skyrocketed, as have the prices of electricity, coal and oil.
By Oct. 5, “the front-month benchmark Dutch TTF gas contract was above $116, surpassing $124 per megawatt hour near midday—a jump of more than 14% on the day and its highest price ever,” reported Fortune.