China makes hundreds of millions of dollars from reselling LNG from the U.S. to Europe

Chinese companies are sending tankers carrying U.S. liquefied natural gas (LNG) to Europe at a significant profit and are helping countries on the continent replenish their reserves ahead of winter.

With Chinese domestic demand shrinking, local companies with long-term LNG contracts with the United States are selling off surplus supplies, earning hundreds of millions of dollars for each shipment. In the first eight months of this year, only 19 LNG ships docked at Chinese ports, compared to 133 such ships in the same period last year, meaning that a significant portion of them were diverted to buyers in Europe, as well as Japan and South Korea, the paper explained.

“This is a mutually beneficial relationship for China and the United States,” said Wei Xiong, a senior analyst at Rystad Energy consulting firm. According to the expert, the contracts, which run for up to 25 years, have confirmed the U.S. intention to invest billions of dollars in building new LNG terminals along the Gulf Coast and thereby expand its export capacity. Unlike similar agreements with other countries, contracts with the U.S. usually involve “destination flexibility.

Chinese shipments to European countries are too small to help them avoid gas shortages this winter. It is difficult to accurately estimate the profits that China makes from such gas resale deals: the agreements are private in nature, companies can resell LNG purchased on both long-term and pre-delivered spot deals, and cargoes can pass through “many hands in the sales process, even when ships are already at sea.