More Russian gas/LNG to China: China becomes a regional LNG trader and supplier

What-if scenario analysis: China’s potential expanding influence on the LNG market 

Thesis

Europe has shut the door on Russian gas. With the REPowerEU regulation now in force, banning Russian LNG by end-2026 and pipeline gas by late 2027, those molecules are turning east, and Arctic LNG 2 cargoes have been landing in China since 3Q 2025. China is also close to supply the missing piece of a trading hub of its own: yuan-denominated LNG futures on the Shanghai Futures Exchange.

This analysis explores a hypothetical trajectory: should China scale up imports of Russian pipeline gas/LNG on a large scale, swap its flexible term LNG volumes and surplus domestic gas for cross-border sales, the country could evolve into a pivotal regional LNG trader and supplier.

This structural shift would, in this modelled scenario, ease China’s net LNG import reliance and create targeted export supply to satisfy rising gas demand across Asia, especially Southeast Asia.

Context

This scenario is built to quantify market outcomes under a clear what-if test case: what market shifts would unfold if all proposed Russian cross-border gas pipeline supply schemes to China move forward, combined with sustained rerouting of sanctioned Arctic LNG 2 to Chinese terminals and material expansion of China’s divertible term LNG cargo pool.

Drawing on factual baseline data covering existing pipeline capacities, signed contracts, terminal construction schedules and historical LNG trade volumes, the model projects excess flexible contracted LNG supply, feasible LNG export volumes and regional arbitrage opportunities, most notably seasonal trading gaps between China’s winter-heavy gas demand and Southeast Asia’s summer demand highs.

Findings

Finding 1: Four proposed Russian pipeline projects could add 97 Bcm/y of incremental gas supply to China by 2040, equivalent to 70 mtpa LNG

Russia already delivers 38 Bcm/y of gas to China via the operational Power of Siberia 1 (PoS 1), and a Far East route with contracted volume of 12 Bcm/y is scheduled to launch in 2027. Four additional pipeline supply frameworks have been proposed by Russia:

• A potential 6 Bcm/y expansion of the PoS 1.
• A 50 Bcm/y Power of Siberia 2 (PoS 2) project via Mongolia.
• A 4-6 Bcm/y third-party transit volumes via existing Central Asia-China pipelines.
• A 35 Bcm/y transit gas pipeline project to China through Kazakhstan.

If all four proposed developments reach full commercial operation, together with the firm gas supply of 50 Bcm/y from PoS 1 and Far East route, the combined 147 Bcm/y incremental supply would equal approximately 88% of Russia’s pre-war gas exports to Europe in 2021. This wave of Russian pipeline gas would displace China’s domestic gas demand currently met via LNG imports, potentially freeing term contracted LNG cargoes for diversion and regional re-export.

 China Pipeline Gas Imports 

Source: Lumen by FGE NexantECA™ as of July 2026.

Finding 2: China’s divertible, flexible LNG volumes will jump from under 7 mtpa (2025) to over 22 mtpa by 2030, creating a large tradable LNG pool for regional arbitrage 

Between 2021 and 2023, Chinese players signed term LNG contracts totalling 20.5 mtpa with North American export projects, all of which have completed FIDs. The flexible terms attached to these North American-sourced cargoes significantly expand the pool of volumes available for diversion away from China. Compounding this structural expansion of flexible supply is the rapid scaling of China’s self-operated LNG carrier fleet, which provides sufficient shipping capacity to physically execute cargo rerouting and further enlarge the effective pool of tradable volumes.

Under this scenario, consistent deliveries of competitively priced Arctic LNG 2 to China will act as an additional supply buffer. Combined with the projected 22 mtpa of divertible LNG by 2030, they form a large, sustainable tradable supply pool unique among Northeast Asian importers. Together with continuous surpluses of Russian pipeline gas assumed in our model, this flexible cargo base creates lasting commercial value for cross-border LNG cargo swaps and re-export arbitrage activity.

 China LNG Imports 

Source: Lumen by FGE NexantECA™ as of July 2026.

Finding 3: Surplus LNG terminal capacity enables China to deploy reverse liquefaction and launch LNG exports, tapping structural seasonal LNG arbitrage opportunities with Southeast Asia 

China’s existing operational LNG receiving capacity exceeds 160 mtpa, with nearly 80 mtpa of new terminals under construction and set to come online by 2030, lifting total national receiving capacity to at least 240 mtpa—double the country’s base-case LNG demand. Selective integration of liquefaction units at some terminals can assist market participants in optimising operational flexibility.

From a regulatory standpoint, outbound LNG exports drawing feedgas from China’s domestic market will be classified as official export activities, subject to specialised export licences. This regime stands distinct from the existing tax-free bonded storage and transshipment scheme operated by PipeChina and NOCs. Against the backdrop of substantial incremental Russian pipeline gas and LNG supply flowing into China, such export operations are commercially feasible provided relevant policy support is secured.

Under this scenario, China holds clear potential to supply LNG to other Asian markets, catering mainly to surging demand across Southeast Asia. Notably, China’s domestic gas demand registers a pronounced seasonal disparity, with consumption far higher in winter than in summer, leaving ample surplus gas for LNG exports in warmer months. This supply surplus coincides precisely with Southeast Asia’s summer demand peak, forming a mutually beneficial seasonal demand balance between the two regions.

China LNG Imports 

Source: Lumen by FGE NexantECA™ as of July 2026.

Watchpoints

This scenario relies on 100% completion of all four proposed Russian cross-border pipeline projects; multiple barriers could delay or reduce the scale of incremental gas supply to China and mute China’s LNG trading emergence.

Political and administrative bottlenecks: Negotiations over bilateral financing as well as transit approvals with Mongolia and Kazakhstan for PoS 2 and the Kazakhstan transit pipelines carry multi-year political and administrative execution risks. Such hurdles may delay full commissioning beyond 2040 or result in permanent capacity downsizing, which would curtail China’s potential volumes of regional LNG exports.

Sanctions escalation: Expanded global restrictions on Russian Arctic LNG shipping and insurance could halt steady cargo rerouting to China, removing a key supply pillar of this scenario.

LNG export permit freeze: A formal ban on issuing dedicated LNG export permits extended until 2035 will confine all cross-border LNG shipments exclusively to tax-exempt bonded transshipment operations, and rule out any export capacity based on re-liquefied Russian pipeline gas.

Modelling Assumptions

The following adjustments are made relative to our baseline case:

1. 1. New 5 Bcm/y Russia-China gas contract starting 2030, transported via spare capacity on Central Asia–China gas pipelines.
   2. New 35 Bcm/y Russia-Kazakhstan-China transit pipeline to launch late 2031; a 30 Bcm/y supply contract for this route is effective from early 2032.
   3. PoS 1 6 Bcm/y expansion and PoS 2 50 Bcm/y project are already included in base case.
   4. Extra 4 mtpa LNG import volumes under Russia Arctic LNG II contracts, available from 2027.
   5. 50 mtpa total new LNG liquefaction capacity across South, East and Northeast China, phased commissioning starting 2030.

Modelling Limitations

Outputs are structurally derived hypothetical projections and do not capture market sentiment or risk premia. Use as a directional what-if baseline, not a definitive point forecast.

The model excludes unforeseen energy policy shifts in China or Southeast Asia that could permanently reshape baseline gas demand profiles independent of cross-border Russian supply flows.

 By Wei Huang — w.huang@fgenexanteca.com

Published 2 Jul 2026

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