(MENAFN - The Peninsula) The Peninsula
Investments under China's enormous ‘Belt and Road Initiative' (BRI) are expected to increase economic growth and energy demand, particularly in transport and heavy industry in China and the recipient countries. This initiative will also impact major gas exporters.
In its latest research report, titled ‘Belt and Road Initiative: What impact will this have on gas exporters?', Al-Attiyah Foundation, explores how gas exporters can work within this new paradigm and the possible impacts of BRI on their plans.
The report said major gas exporters have the choice to compete with the BRI or to cooperate with it. In practice, most are likely to do both, in different circumstances, it added. To compete, major gas exporters can target markets in BRI countries including China itself and develop LNG receiving terminals and partnerships with local gas importers and customers.
To head off competition from coal and nuclear power, the LNG would need to be competitively priced. Conversely, to cooperate, leading gas exporters could invite Chinese investment in new LNG liquefaction and regasification terminals, pipelines and gas-fired power plants and partner with Chinese state oil companies and utilities, the report added.
Originally called the One Belt One Road (OBOR), the BRI, which is the brainchild of the Chinese leader Xi Jinping, is designed to connect Europe and Asia, with energy connectivity being a huge part of the plan.
Potentially, the initiative requires a huge financial investment for new energy transporting and consuming infrastructure which includes gas pipelines, power plants and LNG terminals. It will also have a key influence on the future of gas transportation and consumption within Asia, the centre of the future global demand. China is still set to be the largest source of new gas demand globally until 2040.
To understand the challenges of the BRI, the report said major gas exporting countries and their companies will have to invest more in gathering data and insights and in building relationships in China itself and in the key gas-consuming BRI countries. These relationships will include effective membership of the right international and BRI-related bodies, and partnerships with influential and capable Chinese companies.
First officially announced in 2013, the BRI refers to land routes through Eurasia, divided into six corridors including Mongolia-Russia, Eurasian Landbridge (Russia to Europe), Indochina, Bangladesh-India, Pakistan (CPEC), and Central Asia-West Asia.
From an energy perspective, this would primarily encompass oil and gas imports by pipeline from Russia and Central Asia.
The road element of the initiative covers marine routes through the Indian Ocean to East Africa and through the Suez Canal to Europe; such as tanker-borne deliveries of oil and LNG, mostly from the Middle East and eventually East Africa (Mozambique and Tanzania for LNG, Uganda and perhaps Kenya for oil).
China has several motives for launching the BRI which include deploying its vast foreign exchange holdings constructively, encouraging new economic growth, creating demand for Chinese products and services, building geopolitical influence in key locations, strengthening and streamlining trade routes, and as a way to protect access to vital raw materials, including energy.