China Refuses To Buy Russian LNG At Market Prices

Beijing wanted a big discount.

Chinese buyers of liquefied gas demand discounts on goods from Russia, even from companies not included in the sanctions lists. This was reported by Reuters, citing sources familiar with the recent transactions of Novatek, the largest LNG producer in Russia, which has been trying to enter the Chinese market since the spring.

According to the agency's sources, Novatek has been looking for buyers in China for its gas since April, as sanctions complicated its exports from the multibillion-dollar Arctic LNG-2 project. The Chinese representative office of the company, opened specifically to search for local customers, managed to sell a cargo of 75,000 tons, the bulk of which — 60,000 tons — was acquired by Beijing Gas Group, sources told Reuters.

However, Novatek had to make concessions on the price. "Despite the fact that the Yamal LNG project or Novatek as a company are not under US sanctions, ultimately buyers still expect discounts, because it is a Russian cargo," said one of the Chinese traders.

China already receives pipeline gas from Russia at a huge discount, which Gazprom pumps through the Power of Siberia gas pipeline launched in 2019. This year, according to the files of the federal budget, the price of these supplies will be $260 per thousand cubic meters. This is 35% less than the remaining European customers of Gazprom ($400 per thousand cubic meters).

As part of the Power of Siberia-2 project, which the Kremlin persistently offers to Beijing, China even requires gas at domestic prices: this is about $60 per thousand cubic meters — that is, four times less than Gazprom receives now.

With discounts, Russian oil flows to China, which was abandoned by European countries due to sanctions. At its peak, in the summer of 2022, the discount of Russian varieties for Chinese importers reached 16%, but now it has shrunk to several dollars thanks to the "shadow fleet", which carries barrels bypassing Western restrictions.

According to the estimates of the Gaidar Institute, from March to December 2022, the total discount granted to Chinese buyers of Russian oil amounted to $5.3 billion, and for January-September 2023 — another $3.7 billion.

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