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US-China Energy Relations: A Snapshot | Q&A with Dr. Erica Downs, Dr. Shangyou Nie and David Sandalow
Q&A by Erica Downs & David Sandalow • January 24, 2022
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US-China Energy Relations: A Snapshot | Q&A with Dr. Erica Downs, Dr. Shangyou Nie and David Sandalow
Q&A by Erica Downs & David Sandalow • January 24, 2022
The United States and China are the world’s largest energy producers and energy consumers.[1] Despite significant and growing tensions between the US and Chinese governments, overall trade ties between the two countries remain strong.[2] Their relationship on energy issues is complex, including areas of mutually beneficial cooperation and strong disagreement.
In this piece, the Center on Global Energy Policy’s Erica Downs, Shangyou Nie and David Sandalow discuss several recent developments in the US-China energy relationship.
Q: What energy products does the United States export to China?
A: US energy exports to China include crude oil, petroleum products, liquefied natural gas (LNG) and coal. LNG and coal exports both increased significantly in the past year.
- During the first 10 months of 2021, the United States exported 592,000 barrels per day (bpd) of crude oil and petroleum products to China. In 2020, the full year figure was 715,000 bpd.[3]
- During the first 10 months of 2021, the United States exported 8.02 million tons of LNG to China. In 2020, the full year figure was 4.5 million tons.[4]
- During the first nine months of 2021, the US exported 9,536,631 short tons of coal (more than 90 percent of which was metallurgical coal, used for steelmaking) to China. In 2020, the full year figure was 1,787,640 short tons.[5]
In January–October 2021, China was the largest buyer of US crude oil, second largest buyer of US LNG and second largest buyer of US metallurgical coal.[6] During this same period, the United States was China’s 12th largest supplier of crude oil, second largest supplier of LNG and third largest supplier of metallurgical coal.[7]
Figures 1–3 show US crude oil and petroleum products, LNG and coal exports to China over the past five years.
Figure 1: US crude and oil product exports to selected countries
Source: US Energy Information Administration, “Petroleum & Other Liquids: Exports by Destination,” December 30, 2021, https://www.eia.gov/dnav/pet/pet_move_expc_a_EP00_EEX_mbblpd_a.htm.
Figure 2: US LNG exports to China
Source: US Energy Information Administration, “Natural Gas: US Natural Gas Exports and Re-Exports by Country,” December 30, 2021, https://www.eia.gov/dnav/ng/ng_move_expc_s1_a.htm.
Figure 3: US coal exports to China
Source: US Energy Information Administration, “Coal: Quarterly Coal Report,” Q3 2021, Q4 2020 and Q4 2018, https://www.eia.gov/coal/production/quarterly/.
Q. Why did US and Chinese firms sign so many LNG supply agreements during the fourth quarter of 2021?
A. In 2018 and 2019, the Chinese government imposed tariffs on US LNG in response to US tariffs on Chinese products. As a result, US LNG exports to China fell almost to zero during much of 2019.[8] After the US-China Phase One trade agreement became effective in February 2020, Beijing began to allow Chinese LNG importers to apply for exemptions to the tariffs, and US LNG began to flow to China again.
US-China commercial activity related to LNG was especially strong in the fourth quarter of 2021.
Between October and December 2021, US and Chinese companies signed eight LNG sales and purchase agreements (see Table 1). These agreements provide for delivery of 14 million tons per annum (mtpa) of US LNG to China—more than 11 times the volume under previous agreements signed between US and Chinese firms (1.2 mtpa).[9] The new agreements were mostly for terms of 13–20 years, helping US sellers obtain financing for expensive liquefaction facilities. (Before US and Chinese firms signed long-term LNG agreements, Chinese firms purchased US LNG on the spot market or imported it through intermediaries.[10])
Table 1: US-China LNG supply agreements signed in Q4 2021
|
Buyer |
Seller |
Signing date |
Volume (mtpa) |
Duration (years) |
Start |
|
CNOOC Gas & Power |
Venture Global LNG |
Dec. 20, 2021 |
2.0 |
20 |
Not specified |
|
CNOOC Gas & Power |
Venture Global LNG |
Dec. 20, 2021 |
1.5 |
“Shorter-term” |
Not specified |
|
Foran Energy |
Cheniere |
Nov. 24, 2021 |
0.3 |
20 |
January 2023 |
|
Sinochem |
Cheniere |
Nov. 5, 2021 |
1.8 |
17.5 |
July 2022 |
|
Sinopec Corp. |
Venture Global LNG |
Nov. 4, 2021 |
2.8 |
20 |
Not specified |
|
Sinopec Corp. |
Venture Global LNG |
Nov. 4, 2021 |
1.2 |
20 |
Not specified |
|
Sinopec (UNIPEC) |
Venture Global LNG |
Nov. 4, 2021 |
3.5 |
Short-term |
March 2023 |
|
ENN Energy |
Cheniere |
Oct. 11, 2021 |
0.9 |
13 |
July 2022 |
Source: Company announcements.
Note: Sinochem’s agreement with Cheniere starts at 0.9 mtpa.
This new wave of US-China LNG agreements is due to several factors.
First, LNG spot prices in Asia reached record highs in October 2021, averaging more than seven times US natural gas prices.[11] Although that spread is highly unlikely to persist, such dramatic differentials highlighted the commercial potential in trans-Pacific LNG trade.
Second, Chinese natural gas demand is expected to grow significantly in the years ahead, partly because Beijing views natural gas as a tool for fighting local air pollution and a bridge to a low-carbon future. Executives with some of the companies that signed agreements with US LNG producers said those agreements aligned with China’s carbon-neutrality goals, which received growing prominence in 2021.[12]
Third, Chinese buyers might be trying to mitigate the commercial risks of their oil-indexed LNG imports. US-sourced LNG is typically indexed to US Henry Hub natural gas prices, whereas LNG from other locations is mostly linked to oil prices. The price of Brent crude reached a seven-year high of $85 per barrel in October 2021.
Q. Why did China import so much coal from the United States in 2021?
A. China’s purchases of coal from the United States began to surge after Beijing imposed an unofficial ban on coal imports from Australia in late 2020. Before the ban, Australia was China’s largest metallurgical coal supplier, accounting for 49 percent of China’s metallurgical coal imports in 2020.[13] China’s metallurgical coal imports from Australia dropped to zero in December 2020 and remained at that level until October 2021, when Beijing began to allow Australian cargoes to clear customs.[14]
During the 10 months when China imported no metallurgical coal from Australia, China’s buyers of metallurgical coal turned to the United States to help fill the gap. In 2020, China imported less than 1 million tons of metallurgical coal from the United States, a small fraction of the more than 35 million tons it bought from Australia.[15] In January–October 2021, China’s purchases of US metallurgical coal increased to nearly 8 million tons, making the United States China’s third-largest supplier of metallurgical coal, behind Mongolia and Russia, during this period (see Figure 4).
Figure 4: China’s metallurgical coal imports
Source: Tex Energy Report, November 24, 2021 and February 10, 2021, accessed via Factiva.
Q. What is the history of US-China solar trade disputes? What are the most recent developments?
A. US-China solar trade disputes date back to 2012, when the US Department of Commerce imposed antidumping and countervailing duties on solar panels from China. In response, the Chinese government imposed tariffs on US-produced polysilicon, a key raw material in photovoltaic cells. The US Department of Commerce imposed additional tariffs on Chinese solar manufacturers in 2014.
In January 2018, President Donald Trump imposed a 30 percent “safeguard” tariff on solar cells and modules from all countries, finding that imports were seriously injuring US manufacturers.[16] (China was the largest supplier of these products.) In September 2018, the Trump administration imposed 10 percent tariffs on a range of Chinese products, including several solar module components. These tariffs were increased to 25 percent in May 2019.[17] The Chinese government’s response included tariffs on US crude oil and LNG.
Recent developments include:
- In June 2021, the Biden administration banned the import of solar panels containing silica-based products made by Hoshine Silicon Industry Co. Ltd., citing a finding that Hoshine uses forced labor in China’s Xinjiang region.[18]
- In September 2021, a WTO dispute resolution panel rejected China’s challenge to the US “safeguard” tariffs imposed in January 2018.[19] China has appealed.
- In November 2021, the US International Trade Commission issued a report finding that the “import relief provided beginning in 2018 to the US industry producing crystalline silicon photovoltaic cells … continues to be necessary to prevent or remedy serious injury to the US industry,” noting that relief will expire on February 6, 2022.[20]
- According to USA Trade Online, a database provided by the US Census Bureau, less than 1 percent of solar cells imported into the United States during the first 11 months of 2021 came from China.[21] (Some of these solar cells came from Chinese companies operating in other countries.)
Q. What role does energy play in the US-China Joint Glasgow Declaration on Enhancing Climate Action in the 2020s, announced in November 2021?
A. Energy plays a central role in the US-China Joint Glasgow Declaration, reflecting the energy sector’s central role in climate change. In the declaration, the two governments state their intention to cooperate on “maximizing the societal benefits of the clean energy transition, policies to encourage decarbonization and electrification of end-use sectors … and deployment and application of technology such as CCUS and direct air capture.”[22]
The declaration’s most detailed provisions are on emissions from methane. The two governments agreed to cooperate on the measurement of methane emissions, develop additional measures to enhance methane emission control at both the national and sub-national levels, and conduct joint research on methane emission reduction. The Chinese government agreed to develop a “comprehensive and ambitious” National Action Plan on methane by November 2022.
China did not sign the Global Methane Pledge initiated by the United States and European Union announced at the UN climate change conference in Glasgow. A spokesperson for China’s Ministry of Foreign Affairs said “China attaches high importance to the control of non-carbon-dioxide greenhouse gases … [and] is ready to work with other parties to advance global cooperation on reducing non-carbon-dioxide greenhouse gases.”[23]
China and the United States are the world’s largest and fourth-largest emitters of methane, respectively.[24] Methane is the second biggest contributor to human-caused global warming, after carbon dioxide. The biggest sources of China’s methane emissions are coal mining and agriculture, and the biggest sources of US methane emissions are agriculture and the oil and natural gas industry.[25]
Q. Will the energy targets in the US-China Phase One trade agreement be met?
A. In the US-China Phase One trade agreement, signed in January 2020, China committed to increase its purchase of certain US energy products (LNG, oil, refined petroleum products and coal) by $52.4 billion above the 2017 baseline during 2020 and 2021.[26] Total 2017 purchases of these products[27] were $7.6 billion, according to USA Trade Online, so China’s combined 2020–2021 purchase commitment was $67.6 billion ($7.6 billion for each year plus the additional $52.4 billion).[28]
Although final data are still pending, this target will almost certainly be missed by a wide margin. From January 2020 through November 2021, US exports to China of energy products covered by the Phase One trade deal totaled $24.1 billion—a little more than one-third of China’s purchase commitment. Figure 5 shows these exports by product.
Figure 5: US Exports of Covered Energy Products to China
Source: US Bureau of the Census, USA Trade Online, https://usatrade.census.gov/.
Q. Are the United States and China working together on the release of strategic oil stocks?
A. Press reports suggest some cooperation between the two governments on the release of strategic oil stocks, however the precise amount of cooperation is unclear.
Public reporting related to this topic includes the following:
- On November 15, 2021, Presidents Joe Biden and Xi Jinping held a virtual meeting. The White House readout of the meeting said the two leaders “discussed the importance to taking measures to address global energy supplies.”[29] China’s state news agency, Xinhua, said President Xi “noted the need for China and the US to call on the international community to jointly protect global energy security.”[30] The South China Morning Post reported that President Biden had asked President Xi if China would contribute to a multilateral release from strategic oil stocks, citing an anonymous source.[31]
- On November 18, 2021, China’s National Food and Strategic Reserves Administration told Reuters it was working on a crude oil release, but declined to comment on the US request for top oil consumers to release strategic stockpiles.[32]
- On November 23, 2021, the White House announced that up to 50 million barrels from the United States Strategic Petroleum Reserve would be released over the next several months in parallel with releases by other major oil-consuming nations including China, India, Japan, South Korea and the United Kingdom.[33]
- On November 24, 2021, a reporter asked a spokesperson for China’s Ministry of Foreign Affairs, Zhao Lijian, to confirm that China would participate in this release. Zhao responded that China “attaches great importance to the stability of the global oil market [and] will make arrangements to release crude oil from reserves and adopt other necessary measures to keep the market steady in light of its own realities and needs, and will release relevant information on a timely basis.”[34]
- On January 14, 2022, Reuters reported that China will release crude oil from its national strategic stockpiles around the Lunar New Year, which begins February 1, as part of a plan coordinated by the United States with other major oil consumers, according to sources with knowledge of talks between the United States and China. According to one source, “China agreed to release a relatively bigger amount if oil is above $85 a barrel, and a smaller volume if oil stays near the $75 level.”[35]
Notes
[1] US Energy Information Administration, “Total energy production 2019,” https://www.eia.gov/international/rankings/world?pa=12&u=0&f=A&v=none&y=01%2F01%2F2019https://www.statista.com/statistics/263455/primary-energy-consumption-of-selected-countries/.
[2] Statista, “Total monthly value of U.S. trade in goods (export and import) with China from October 2019 to October 2021,” https://www.statista.com/statistics/277494/total-value-of-us-trade-in-goods-with-china/https://www.brookings.edu/blog/order-from-chaos/2021/08/12/the-new-normal-in-us-china-relations-hardening-competition-and-deep-interdependence/.
[3] US Energy Information Administration, “Petroleum & Other Liquids, Exports by Destination, Total Crude Oil and Products,” December 30, 2021, https://www.eia.gov/dnav/pet/pet_move_expc_a_EPC0_EEX_mbbl_m.htm.
[4] US Energy Information Administration, “U.S. Natural Gas Exports and Re-Exports by Country,” December 30, 2021, https://www.eia.gov/dnav/ng/ng_move_expc_s1_m.htm.
[5] US Energy Information Administration, Quarterly Coal Report, July-September 2021, January 2022, page 8, https://www.eia.gov/coal/production/quarterly/pdf/qcr-all.pdfhttps://www.eia.gov/coal/production/quarterly/archive/012120q4.pdf.
[6] US Energy Information Administration, “Petroleum & Other Liquids, Exports by Destination, Total Crude Oil and Products,” December 30, 2021, https://www.eia.gov/dnav/pet/pet_move_expc_a_EP00_EEX_mbbl_m.htmhttps://www.eia.gov/dnav/ng/ng_move_expc_s1_m.htmhttps://www.eia.gov/coal/production/quarterly/pdf/qcr-all.pdf.
[7] Customs Database, http://43.248.49.97/.
[8] US Energy Information Administration, “U.S. Liquefied Natural Gas Exports by Vessel to China,” data released December 30, 2021, https://www.eia.gov/dnav/ng/hist/ngm_epg0_eve_nus-nch_mmcfM.htm.
[9] In February 2018, Cheniere Energy Inc. signed two sale and purchase agreements with China National Petroleum Corporation (CNPC), under which CNPC subsidiary will purchase approximately 1.2 million tons per annum of LNG, with part of the supply starting in 2018 and the remainder starting in 2023. Although Exxon Mobil signed a sale and purchase agreement with China’s Zhejiang Energy Group in April 2019, the LNG is being supplied from Exxon’s global portfolio. See “Cheniere Announces LNG Sale and Purchase Agreements with China National Petroleum Corporation,” Businesswire, February 9, 2018, https://www.businesswire.com/news/home/20180209005086/en/Cheniere-Announces-LNG-Sale-and-Purchase-Agreements-with-China-National-Petroleum-Corporationhttps://www.reuters.com/article/us-exxonmobil-china-lng/exxonmobil-agrees-20-year-lng-deal-with-chinas-zhejiang-energy-idUSKCN1RZ069.
[10] Nikos Tsafos, “A New Chapter in U.S.-China LNG Relations,” Center for Strategic and International Studies, December 6, 2021, https://www.csis.org/analysis/new-chapter-us-china-lng-relations.
[11] FRED Economic Data, Global price of LNG, Asia, https://fred.stlouisfed.org/series/PNGASJPUSDMhttps://tradingeconomics.com/commodity/natural-gas.
[12] See, for example, the statement of Wang Yusuo, chairman of the board of ENN Natural Gas, in Cheniere Energy, Inc., “Cheniere and ENN Sign Long-Term LNG Sale and Purchase Agreement,” October 11, 2021, https://lngir.cheniere.com/news-events/press-releases/detail/231/cheniere-and-enn-sign-long-term-lng-sale-and-purchase.
[13] “China’s Metallurgical Coal Imports by Source in 2020,” Tex Energy Report, February 10, 2021, Factiva.
[14] “Pre-ban intake lifts China’s October coking coal imports,” Argus, November 23, 2021, https://www.argusmedia.com/en/news/2276459-preban-intake-lift-chinas-october-coking-coal-imports
[15] “China’s Coal Imports in 2020 Reach 204.8 Million MT,” Tex Energy Report, February 10, 2021, Factiva.
[16] USTR, “President Trump Approves Relief for U.S. Washing Machine and Solar Cell Manufacturers,” January 22, 2018,
[17] Emma Foehringer Merchant, “Trump Admin Announces 25% Tariff on Chinese Inverters,” Greentech Media, September 17, 2018, https://www.greentechmedia.com/articles/read/administration-announces-25-inverter-tariffs#gs.uexoquhttps://www.businessinsider.com/trump-china-trade-war-us-raises-tariffs-200-billion-worth-of-goods-25-percent-2019-5?utm_source=markets&utm_medium=ingest.
[18] US Customs and Border Patrol, “Withhold Release Order on Silica-Based Products Made by Forced Labor in Xinjiang,” June 24, 2021,
[19] USTR, “WTO Panel Rejects China’s Solar Safeguard Challenge,” September 02, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/september/wto-panel-rejects-chinas-solar-safeguard-challenge.
[20] US International Trade Commission, “Relief Continues to be Necessary for US Industry Producing Crystalline Silicon Photovoltaic Cells,” November 24, 2021, https://www.usitc.gov/press_room/news_release/2021/er1124ll1852.htm.
[21] US Bureau of the Census, USA Trade Online, accessed January 9, 2022, https://usatrade.census.gov.
[22] US Department of State, “U.S.-China Joint Glasgow Declaration on Enhancing Climate Action in the 2020s,”November 10, 2021, https://www.state.gov/u-s-china-joint-glasgow-declaration-on-enhancing-climate-action-in-the-2020s/.
[23] Ministry of Foreign Affairs of the People’s Republic of China, “Foreign Ministry Spokesperson Wang Wenbin’s Regular Press Conference on November 3, 2021,” November 3, 2021, https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/202111/t20211103_10440928.html.
[24] World Bank Data, Methane emissions, https://data.worldbank.org/indicator/EN.ATM.METH.KT.CE?most_recent_value_desc=true.
[25] US Environmental Protection Agency, “Overview of Greenhouse Gases – Methane Emissions,” https://www.epa.gov/ghgemissions/overview-greenhouse-gases#methanehttps://pubs.acs.org/doi/pdf/10.1021/acs.estlett.1c00463.
[26] Office of the United States Trade Representative, “Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China,”January 15, 2020, Article 6-2, https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republic-china/phase-one-trade-agreement/text.
[27] The agreement permits both official US and Chinese data to be used to determine the 2017 baseline levels and whether the purchase commitments are met. See “Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China,” Article 6-2.
[28] US Bureau of the Census, USA Trade Online, accessed January 14, 2022, https://usatrade.census.gov/.
[29] White House, “Readout of President Biden’s Virtual Meeting with President Xi Jinping of the People’s Republic of China,” November 16, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/16/readout-of-president-bidens-virtual-meeting-with-president-xi-jinping-of-the-peoples-republic-of-china/.
[30] “Xi, Biden pledge to steer China-U.S. relations back on right track,” Xinhua, November 16, 2021, http://www.news.cn/english/2021-11/16/c_1310315008.htm.
[31] Catherine Wong and Frank Tang, “US asks China to release oil reserves as part of discussions on economic cooperation, source says,” South China Morning Post, November 17, 2021, https://www.scmp.com/economy/china-economy/article/3156290/us-asks-china-release-oil-reserves-part-discussions-economic.
[32] Muyu Xu and Shivani Singh, “Exclusive: China reserve bureau working on crude oil release,” Reuters, November 18, 2021, https://www.reuters.com/business/energy/exclusive-china-reserve-bureau-working-crude-oil-release-2021-11-18/.
[33] White House, “President Biden Announces Release from the Strategic Petroleum Reserve As Part of Ongoing Efforts to Lower Prices and Address Lack of Supply Around the World,” November 23, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/23/president-biden-announces-release-from-the-strategic-petroleum-reserve-as-part-of-ongoing-efforts-to-lower-prices-and-address-lack-of-supply-around-the-world/.
[34] Ministry of Foreign Affairs of the People’s Republic of China, “Foreign Ministry Spokesperson Zhao Lijian’s Regular Press Conference on November 24, 2021,” November 24, 2021, https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/202111/t20211124_10452652.html.
[35] Nidhi Verma and Timothy Gardner, “Exclusive: China agrees with US to release oil reserves near Lunar New Year,” Reuters, January 14, 2022, https://www.reuters.com/business/energy/exclusive-china-agreed-with-us-oil-reserves-release-near-lunar-new-year-sources-2022-01-14/.
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