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China’s Return, Price Ceiling Are Two Challenges to Global Energy Market Balance

In the frame, Cornelia Meyer, macro-economist and energy expert. A refueling station in the Chinese city of Chongqing. (Reuters)
In the frame, Cornelia Meyer, macro-economist and energy expert. A refueling station in the Chinese city of Chongqing. (Reuters)
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China’s Return, Price Ceiling Are Two Challenges to Global Energy Market Balance

In the frame, Cornelia Meyer, macro-economist and energy expert. A refueling station in the Chinese city of Chongqing. (Reuters)
In the frame, Cornelia Meyer, macro-economist and energy expert. A refueling station in the Chinese city of Chongqing. (Reuters)

Cornelia Meyer, macro-economist and energy expert, said the reopening of China following the zero-Covid-19 policy and the price ceilings imposed on the purchase of energy products from Russia will pose challenges to the balance of the global energy market.

She also expected the demand for gas to grow one percent this year, while the supply to increase to less than one percent.

In an interview with Asharq Al-Awsat, Meyer said the shrinking demand for gas in Europe was a result of the war in Ukraine, as European countries sought to curb their reliance on Russian gas.

This will inevitably increase the demand for the liquefied natural gas (LNG), which will lead to a rise in the cost of LNG shipments and an increase in gas prices in Europe and around the world, according to the expert.

Nonetheless, Meyer emphasized that with the growth of Chinese demand, energy markets will become more stable.

“With China emerging from the zero Covid-19 policy, the demand for LNG will increase, making it difficult for Europe to control the shipped supplies,” she said.

Meyer noted that the current situation was due to the fact that the gas price ceiling set by the European Union to punish Russia could be counterproductive in attracting the required quantities of gas, as there are fewer buyers, which gives them great bargaining power.

According to Meyer, this comes at a time when the demand for oil has exceeded pre-pandemic levels that topped 102 million barrels per day, while the market is still tight, with OPEC’s surplus production capacity at about two barrels per day.

Growth and production of LNG supplies would remain limited until 2025 amid a very long business cycle, she noted.

The Ukrainian war, according to the expert, led to a decrease in Russian gas consumption and production and a redirection of Russian crude oil trade routes away from Europe to Asia, specifically through China, India and Türkiye, where Russian crude is bought at a huge discount.

Regarding the energy markets, Meyer said she believed that the lack of investment was the main challenge in the hydrocarbon sector.

“Saudi Arabia and the UAE invested reliably, while international oil companies were reluctant to do so due to profitability concerns, amid the Covid-19 pandemic and environmental legislation,” she remarked, adding: “Saudi Arabia is not a player in the global gas and LNG markets, but it is set to become a major player in hydrogen in the future.”

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China Carefully Assembling a Deep-sea Mining Strategy

So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP
So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP
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China Carefully Assembling a Deep-sea Mining Strategy

So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP
So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP

In a world hungry for crucial resources, China may not be poised to start deep-sea mining but it is planting seeds for such operations in a meticulously planned economic and geopolitical strategy.

The world's oceans, both international waters and those under national jurisdiction, are rich in minerals and metals, like cobalt, nickel and copper.

These are important for building electric car batteries, for instance, and other technologies as countries try to transition away from fossil fuels.

China "is an energy-thirsty country. It will look for resources everywhere," including the deep sea, said Julia Xue of Shanghai Jiao Tong University.

But she said China is not particularly anxious over the issue, although recent developments -- one company is itching to be the first to start mining the sea bed -- may put more pressure on Beijing.

A Canadian firm, The Metals Company, has filed an application with the United States to begin undersea mining in international waters.

Using its American subsidiary, it acted after President Donald Trump, bypassing international negotiations, signed an executive order in April to speed up the permit-issuing process for such mining in US and international waters.

Trump cited an obscure 1980 US law that says American citizens can explore for and recover deep sea minerals in areas beyond the country's jurisdiction.

Environmental groups are outraged by Trump's order, arguing that a wild hunt for the potato-sized, metal-containing nodules could harm fragile undersea ecosystems.

The Canadian company initially said it would submit its request to the International Seabed Authority (ISA), a body which has jurisdiction over the ocean floor in international waters.

The Metals Company says it ignored this authority because of its slow pace in talks on adopting a mining code that establishes rules for exploiting seabed resources. The United States is not an ISA member.

A long-time observer of those talks who spoke on condition of anonymity said China is not particularly worried about who starts mining first.

"For them it's more about dominance, staying competitive in the game, and giving the impression that you can't mess with us," the observer said.

With that goal in mind "they're definitely developing the technology and putting the strategic agreements in place," Alex Gilbert, a researcher at the Payne Institute for Public Policy at Colorado School of Mines, told AFP.

For instance, China has reached an agreement with the Cook Islands to explore for minerals in that Pacific country's waters.

Another tiny Pacific nation, Kiribati, also says it is exploring a deep-sea mining partnership with China.

This approach is "more geopolitical than economic," said Emmanuel Hache of the French Institute for International and Strategic Affairs, noting Beijing is using undersea mining as a lure to cement greater diplomatic support as it exerts power.

China holds five contracts handed out by the ISA to look for resources in the Pacific and Indian Ocean sea beds and these contracts cover all types of undersea mineral resources. China's is the largest number of the 22 contracts the organization has granted.

Years behind

"From a research perspective, we have been continuously getting closer. And from a technical perspective, we have been continuously improving," said Chen Xuguang, a researcher at Ocean University of China.

In 2024 a Chinese prototype deep-sea mining vehicle called Pioneer II, developed by Shanghai Jiao Tong University, set a national record by operating at a depth of more than 4,000 meters (13,100 feet).

State-owned Beijing Pioneer Hi-Tech Development Corporation told AFP that later this year it plans a seabed nodule collection test.

Still, China is not as advanced technologically as The Metals Company, experts say.

"I would characterize China as being two to four years behind them in terms of their technology," said Gilbert in Colorado.

Hache, the French expert, put the gap at five years.

But China has an advantage over firms like the Canadian one in recovering and processing nodules: its companies are supported by the state and China has infrastructure for processing metals.

The observer of the international seabed talks said China does not need seabed mining for metal supply, "but maybe geopolitically, in the context of maintaining their control over the commodities market."

China wants to keep its options open, this person said.

And while it supports an international mining code, China does not need one now and "they're not going to put pressure until they've decided strategically that they're ready," said Gilbert.