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Executive Summary
China is the world’s largest oil and gas importer. Due to the challenges renewable energy sources face and the advent of new oil and gas drilling technology, natural gas has speedily become a new favorite interim clean energy source. With the United States’ advantages in natural gas production, natural gas has become the most promising export to China for the U.S. energy sector. Under the U.S. - China Phase One Trade Agreement signed in January 2020, China committed to buying at least $52.4 billion in additional energy purchases in 2020 and 2021. Despite the COVID-19 pandemic, China’s energy demand is expected to recover as industrial production returns to pre-crisis levels.
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Current Market Needs
Crude Oil
China is the world’s largest crude oil importer and the second-largest crude oil consumer. China’s crude oil imports in 2019 increased an average of 10.1 million barrels per day (b/d), an increase of 0.9 million b/d from the 2018 average. China’s top five crude suppliers: Saudi Arabia, Russia, Iraq, Angola, and Brazil, generated nearly 60% of Chinese crude oil imports for 2019. Due to trade tensions, U.S. crude oil exports to China decreased 42.4% from 84,523,000 barrels (232,000 b/d) in 2018 to 48,680,000 barrels (133,000 b/d) in 2019. China dropped from the third-largest export destination in 2018 to the seventh-largest export destination. Data from the U.S. Energy Information Administration (EIA) shows that from January to May 2020, the U.S. exported 45,950 barrels of oil to China, representing 2.9% of China’s crude imports.
Natural Gas
Natural gas is China’s fastest growing major fuel which saw demand quadruple in the past decade. China is the world’s sixth-largest natural gas producer, the third-largest consumer, and the second-largest importer, according to International Energy Agency (IEA) data. China does not depend heavily on the United States as a supplier of LNG, but China has ranked among the top four customers of U.S. LNG every year since exports began in 2016. In 2019, the largest sources for Chinese LNG imports were Australia, Qatar, Malaysia, and Indonesia.
Liquefied Petroleum Gases
China is also the world’s largest importer and consumer of liquefied petroleum gases (LPG). In 2019, China’s LPG consumption reached 47.06 million tonnes, accounting for 14% of global use, while imports reached 20.68 million tonnes. Investments in petrochemical facilities that use propane as a feedstock have created an export outlet for U.S. propane supplies. Before the imposition of the 25% retaliatory tariff on propane and butane in 2018, the U.S. was the second-largest supplier of LPG to China in 2017, totaling 3.54 million mt, comprising 3.37 million mt of propane and 162,668 mt of butane. With an exclusion in place for China’s retaliatory tariffs for certain products, U.S. LPG is now only subject to a 1% import duty. In 2017, total U.S. LPG exports were 3.54 million tonnes, including 3.37 million tonnes of propane and 162,668 tonnes of butane. The U.S. Gulf Coast region accounted for 90 percent of all U.S. propane exports. According to EIA, in 2017, there were 46,023,000 barrels of U.S. propane exported to China. These exports sharply decreased to 22,633,000 barrels in 2018 and 2,420,000 barrels in 2019 due to growing trade friction. From March to May 2020, China imported 8,343,000 barrels of propane from the U.S. as part of the Phase One Trade Agreement.
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Current Market Trends
Natural Gas
In 2050, the U.S. Energy Information Administration (EIA) expects that China will consume nearly three times as much natural gas as it did in 2018, which was 280.30 b/cm. China’s natural gas consumption accounted for 8.3% of its total energy mix in 2019. Before the COVID 19 crisis China was expected to account for a third of global demand growth through 2022 thanks in part to the country’s “Blue Skies” policy and the strong drive to improve air quality. China’s relatively strong economic recovery from the COVID 19 crisis will probably increase that share. Natural gas is imported either in gas form through pipelines or as liquefied natural gas (LNG) on ships.
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Competitive Landscape
China is the largest crude oil importer and second-largest natural gas importer in the world. China imports these energy products from a variety of markets around the world and prices remain very competitive. It is recommended that U.S. firms remain flexible on pricing and establish strong relationships with potential buyers in the market.
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Best Prospects for U.S. Exporters
Best energy export prospects for U.S. exporters include LNG, crude oil, and petroleum products. All three are part of the Phase One Trade Agreement in which China has committed to buying U.S. energy products.
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U.S. Commercial Service Information
Linda Lu, Commercial Specialist
U.S. Commercial Service China
U.S. Consulate Guangzhou
Linda.Lu@trade.gov
Yue Cao, Commercial Specialist
U.S. Commercial Service China
U.S. Embassy, Beijing, China
Yue.Cao@trade.gov
Scott Yao, Commercial Specialist
U.S. Commercial Service China
U.S. Consulate Shanghai
Scott.Yao@trade.gov
Evelyn Zhou, Commercial Specialist
U.S. Commercial Service China
U.S. Consulate Shenyang
Evelyn.Zhou@trade.gov
Catherine Le, Commercial Specialist
U.S. Commercial Service China
U.S. Consulate Wuhan
Catherine.Le@trade.gov
