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BP's Dudley warns on LNG trade war vulnerability

Insecurity in global trade flows could have a particularly damaging impact on confidence in LNG as an energy source

Trade tensions could impact on LNG's prospects as the world transitions to cleaner energy sources, by encouraging countries to resume a dependence on domestic resources rather than imports, BP chief executive Bob Dudley told the LNG19 conference in Shanghai today.

"Gas is affordable, abundant, cleaner and easily transportable thanks to LNG", says Dudley, while noting that global trade in the liquefied gas is set to more than double from 400bn m³/yr to around 900bn m³/yr by 2040.

But trade wars only serve to remind countries that becoming dependent on imported energy can create political risk. "Countries need to have confidence in the security of their gas supplies," says Dudley.

BP has researched the implications if trade tensions were to escalate — likely in reference to US president Donald Trump's tariff wrangle with China — and found that it could heighten concerns about energy security, leading to less oil and gas trading as countries return to domestic resources.

"This could have a profound implication for countries like China that have created a massive programme of replacing coal for energy," says Dudley

LNG shipments from the US to China have plummeted, at least partially as a consequence of the trade war and higher Chinese tariffs. While 25 US LNG vessels sailed there during the last six months of 2017, only six did during the same period last year, despite a boom in the US' LNG output, according to data from the Institute for Energy Research.

The Energy Information Administration (EIA) projects America could more than double its LNG export capacity by the end of 2019 and could become the world's top natural gas exporter as early as 2022.

But not all observers had a gloomy outlook for global trade tensions in the LNG market. "There are massive supplies sitting in America and I understand that China will currently be reluctant to buy them, as they represent a strong negotiation card in the trade war," Hans Kristian Danielsen, marketing and sales manager at consultancy DNV GL told Petroleum Economist. "But this is only an indirect impact and it could change quickly if relations improve, as I believe they will."

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