Major Chinese importers of liquefied natural gas (LNG) are cautiously seeking additional gas shipments from Russia to take advantage of lower prices. According to insiders, state-owned companies such as Sinopec and PetroChina are in talks to buy Russian gas supplies avoided by other countries at huge discounts.

 

Some Chinese importers are considering using Russian companies to participate in LNG tenders on their behalf to hide their procurement plans from foreign governments. Many importers worldwide no longer dare to buy Russian gas for fear of future sanctions or reputational damage due to the war in Ukraine.

The Chinese seem to be the only ones who dare to take that risk. China’s oil refineries have already taken similar steps by discreetly buying cheap Russian crude oil that the rest of the world no longer wants to take. In addition, according to traders, several gas supplies have been bought by Chinese importers in recent weeks, and Russian gas is traded on the so-called spot market with more than 10 percent discount. On the spot market, goods such as gas are traded directly at the current market price.

On the other hand, China does not currently have an urgent need for more gas. The mild weather and lockdowns in many Chinese cities to contain the corona infections are slowing down demand for the country’s fuel. Russia’s gas can help refill the storage tanks cheaply before prices rise again this summer.

Due to the Western sanctions against Russia, Chinese gas importers remain cautious and choose not to buy large quantities. Also, they use other companies that buy on their behalf to hide their purchases. This makes it appear that the Chinese company is accepting a supply of Russian gas on a long-term contract, which companies and countries worldwide have continued to do despite the war in Ukraine.

There are obstacles for smaller Chinese gas buyers. These buyers are struggling to get credit guarantees to buy additional Russian gas on the market because banks are unwilling to provide those guarantees. Only the major Chinese importers can use so-called open credit schemes or pre-approved credit lines from banks.