Recall from earlier in this series that aside from importing LNG or producing natural gas domestically, consuming countries may have the option to import the energy fuel through pipelines. LNG trade and demand for LNG carriers will then be subject to natural gas volumes and prices transported via pipelines.
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According to the Energy Information Administration, roughly half of China’s natural gas imports were through pipelines in 2012. These came from Central Asian countries (primarily Turkmenistan, followed by Uzbekistan and Kazakhstan), and, to a minor extent, Myanmar. Plans to increase pipeline capacity and supply from Central Asian countries are currently in place. New production or reserve discoveries, as well as agreements with China, could negatively impact LNG trade and carriers.
As one of the largest holders of natural gas resources in the world, Russia is also expected to be a key supplier of natural gas to China in the future. Talks to supply natural gas to China from Russia’s energy giant, Gazprom, started years ago. But subjects such as pipeline routes, financing, and prices have stalled agreements—until recently (more on this in the next article of this series).
In Europe, ~35% of natural gas was supplied from Russia and Norway (primarily through pipelines) in 2012, according to BP Statistics. How much Europe will import from Russia and Norway via pipeline, which affects Europe’s LNG imports, is subject to pipeline capacity, government policies, supplier production, and price.
Iran, which holds one of the largest natural gas reserves in the world, could step up to become a key pipeline natural gas supplier in the future, although its potential is limited by factors such as sanctions, outdated technology, alternative customers, and financing. Central Asian countries could also increase supply to Europe, although the necessity to construct long-distance pipelines that have to travel through several states makes these initiatives vulnerable.