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China has oil and gas trump card on US


DA NANG – The Donald Trump administration is ramping up retaliatory rhetoric against China over its handling of the coronavirus crisis and its corresponding devastation, a renewed trade war threat that promises to hit US energy producers if and when China retorts in kind. 

Keith Krach, undersecretary for economic growth, energy and the environment at the US State Department, said on Monday (May 4) that “we are now turbo-charging” a drive to decouple US supply chains from China.

Krach said that was key to US national security and that the government would soon announce a new course of action after agencies probe which manufacturing should be deemed “essential” and determine how to produce those goods outside of China.

Last month, Trump said he was considering new tariffs on Chinese goods on top of an existing 25% levy punitively imposed on some US$370 billion worth of Chinese goods. If implemented as threatened, it will be bad news for America’s already beleaguered oil and gas producers.

US producers have already been hurt by the trade war. US crude oil exports to China, the world’s largest importer, were zilch in the first quarter of this year due to trade tensions. That’s eroded hard-fought market share US producers had previously steered away from entrenched Chinese suppliers, including oil kingpins Saudi Arabia, Russia and others.

US liquefied natural gas (LNG) imports to China were also hit last year by a punitive 25% levy, throwing several US LNG project proposals into doubt due to the likely lack of long-term Chinese off-take deals. Those proposals have also been stymied by the likely lack of Chinese investment needed to reach final investment decisions (FID).

Late last year, Beijing offered a trade war olive branch in the form of renewed energy purchases. As part of the so-called “phase one” trade deal, Beijing agreed to ramp up US oil and gas imports by at least US$52.4 billion over the next two years, a deal which kicked in on January 15.

An LNG terminal in Yangkou Port in Nantong city, which is in China’s Jiangsu province. Photo: AFP

In April, China procured its first US LNG cargo since March 2019, and has signaled that as many as four more are on the way. Now, with Trump’s ramped up trade war rhetoric and anti-China messaging in his re-election campaign, those promised new LNG imports will be in jeopardy if the US leader pushes through with his new threats.


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