China Grabs Control Of LNG Infrastructure In Move To Bolster Energy Security
In the past few months, China has garnered a top spot in many energy headlines thanks to President Xi Jinping's ambitious goals of reducing carbon emissions and clean energy. China is currently by far the world's largest emitter of greenhouse gases - its emissions are almost twice as high as those of the next runner-up, the USA. So it is big news and a ray of hope for all of us Earthlings that Beijing has announced that it will reach peak emissions in just ten years and then reduce its currently sizeable carbon footprint to zero by 2060. This is no small feat
While this is good news for the climate, and has been really excellent PR for China and President Xi's administration, this development has been largely unmotivated by climate concerns. China's decision to double up on renewables has a lot more to do with energy security - one of Beijing's top concerns. China's voracious appetite for energy has so far been met by huge amounts of foreign energy imports, and China is doing everything in its power to wean itself off foreign fossil fuels and become a stand-alone power generation giant. So far, aggressive moves have been made into largely undeveloped overseas energy markets, increased coal production overseas, where emissions are attributed not to China but to the countries in which China currently operates, and major reversals to nuclear power.
Now, just this week, China has announced the latest phase of its energy security strategy. This is a new government pipeline that is buying up a large portion of the assets of Kunlun Energy Co., the country's largest pipeline company. "China's pipeline network giant made a final move in a $ 6.3 billion asset purchase to strengthen the country's energy security and break down market barriers," World Oil reported this week.
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Kunlun stock received a big bump after it was revealed the company would sell a whopping 60% stake in a Beijing natural gas pipeline and 75% stake in its Dalian subsidiary for liquefied natural gas for a price tag of 40.9 billion yuan. The buyer is China's brand new state-owned company, aptly named PipeChina, which started operations in October. Kunlun is also the subsidiary of a state energy company. It exists under the umbrella of PetroChina Co., the majority owner of a Beijing pipeline and other major LNG transportation infrastructures.
"China Oil & Gas Pipeline Network Corp. is part of an effort by President Xi Jinping's government to consolidate the country's major pipelines and other midstream assets into a single company to enhance competition between drillers and downstream oil and gas sellers "so World Oil elaborated.
Even before these developments, China was well on the way to achieving record LNG imports in the coming year. In September, Reuters reported that Chinese LNG imports are expected to increase by 10%. The country's total gas consumption is expected to increase by 4 to 6% this year, even if natural gas markets in the rest of the world shrink. "China is the only big bright spot in the world gas market, where demand is expected to decline by around 4% as the world economy shrinks due to coronavirus lockdowns," the report said. At this rate, China will overtake Japan as the world's leading LNG importer in just two years.
While China is unlikely to replace these imports with domestically generated energy in the short term, this latest move by President Xi to consolidate China's pipeline infrastructure will allow his government to strengthen its control over the industry and contribute to Beijing's long-term energy security goals .
By Haley Zaremba for Oil Genealogie
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